Daily Financial Breakfast 23 October 2026: Brent Rises 4% to $113.17 While UK Inflation Climbs to 3.5%

Market News Today: Key Takeaways

• Brent rose 4% to $113.17 as attacks on Saudi infrastructure and renewed tensions around the Strait of Hormuz heightened oil-supply concerns.
• UK September inflation increased to 3.5% from 3.1%, prompting Danske Bank to add a November Bank of England rate increase to its forecast.
• France's 10-year government bond yield premium over Germany reached 175 basis points, approaching its 2011 record of around 190 basis points.
• Rabobank, Nomura, ING and Nordea anticipate unchanged ECB rates at the next meeting, but differ over the extent of subsequent tightening.
• China's third-quarter GDP growth improved to 4.5% from 4.3% in the second quarter, while HSBC highlighted weak domestic demand and contracting fixed asset investment.

Market Developments

Foreign Exchange

USD/JPY traded near 156.25 early in Friday's Asian session following Japan's inflation release, then touched approximately 156.00, its lowest level in more than a month, before rebounding.

Gold

Gold rebounded slightly after falling below $4,000 to a fresh three-month low during Friday's Asian session.

Energy & Geopolitics

Brent Climbs 4% as Middle East Attacks Raise Supply Concerns

Brent crude rose 4% to $113.17 as attacks on Saudi Arabian infrastructure heightened concerns about supply disruption. WTI traded around $98.80 per barrel early Friday, near a five-week high, before rising above $100 as incidents involving vessels in the Strait of Hormuz increased and Iran-backed Houthis renewed attacks on Saudi oilfields.

Reports of possible renewed U.S. and Israeli strikes on Iran after the U.S. midterm elections added to the uncertainty, although no such operation has been confirmed. ING strategists Warren Patterson and Ewa Manthey also cited reports of a second U.S. aircraft carrier deployment to the region and the evacuation of U.S. troops from some Middle Eastern bases.

The Associated Press reported that Iran said seven tankers had been damaged in the Strait of Hormuz. Separately, The Wall Street Journal reported that Middle Eastern oil shipments averaged more than 24 million barrels a day in the week through 18 October, exceeding prewar levels of 23.3 million. Transfers near Oman under the so-called Hormuz Shuttle have helped sustain flows.

Delivery costs remained elevated despite those volumes. Rabobank strategist Molly Schwartz said Persian Gulf–China freight rates had reached $1.4 million daily, adding roughly $13.5 per barrel. She also cited physical Brent and Shanghai oil premiums of $10–25 over futures, alongside rising insurance costs and tanker inefficiencies.

Inflation, Sovereign Debt & Central Banks

UK Inflation Rises to 3.5%; Danske Adds November BoE Hike to Forecast

UK consumer-price inflation rose to 3.5% year-on-year in September from 3.1%, while core inflation increased to 2.8% from 2.6% and services inflation reached 3.7% from 3.4%. Danske Bank said the readings were slightly above consensus and exceeded Bank of England projections.

Danske revised its policy forecast to include a November rate increase, citing stronger inflation, resilient activity and signs of labour-market stabilisation. The bank said it believed the BoE would prioritise containing inflation risks and maintaining the credibility of its inflation target.

Sterling posted modest gains near $1.3405 during Friday's early Asian session following the inflation figures.

French-German Bond Spread Reaches 175 Basis Points

France's 10-year government bond yield premium over Germany reached 175 basis points, more than 100 basis points wider than in late February, Brown Brothers Harriman's Elias Haddad said. The spread was approaching its 2011 record of around 190 basis points amid France's fiscal and political crisis.

The Sentix euro-breakup index stood at 2.4% in September, compared with around 13% during Italy's 2018 budget crisis. The ECB's Transmission Protection Instrument provides for sovereign-bond purchases subject to fiscal checks, a safeguard relevant to the risk of disruption spreading across the currency bloc.

Banks Anticipate ECB Hold as Higher Bond Yields Tighten Financing

Rabobank, Nomura, ING and Nordea anticipate unchanged policy at the ECB's next meeting, with Rabobank and Nomura explicitly forecasting that the deposit rate will remain at 2.50%. Their assessments emphasise the tightening in financing conditions alongside persistent inflation risks.

ING's Carsten Brzeski estimated that the increase in German bond yields since the September meeting had roughly the same effect on growth and inflation as an additional 25-basis-point rate increase. For France, he put the equivalent tightening closer to 50 basis points. He noted that headline inflation had increased again in September while leading indicators continued to show eurozone economic resilience.

Rabobank's Bas van Geffen said there was no evidence yet of broad-based second-round inflation effects and forecast a final rate increase in December. Nomura's Andrzej Szczepaniak, George Buckley and Josie Anderson instead forecast increases in December 2026 and March 2027, taking the deposit rate to 3.00%. They described wage negotiations so far in the fourth quarter as benign for second-round inflation effects.

Nordea's Jan von Gerich also retained a forecast of 25-basis-point increases in December and March, while stressing that significantly tighter financing conditions could alter the timing. ING highlighted December's new staff projections as an opportunity to assess energy-price pass-through and the wider economic effects.

China's Economy

China's Q3 Growth Improves to 4.5% as Domestic Weakness Persists

China's GDP growth improved to 4.5% in the third quarter from 4.3% in the second, HSBC analysts said, with stronger September activity and resilience in exports and high-tech industries contrasting with weak domestic demand and contracting fixed asset investment.

HSBC described consumption as increasingly divergent and highlighted a policy shift away from short-term consumption measures towards structural constraints. Initiatives include improving public services, expanding social safety-net coverage and integrating migrant workers into the new urbanisation model.

The bank's assessment favoured targeted fiscal measures over broad-based stimulus. HSBC said China still appeared on track to meet its annual growth target despite domestic headwinds.

Upcoming Key Events

• European Central Bank Governing Council Meeting (29 October 2026): The ECB's October Governing Council meeting concludes with its monetary-policy decision.