This is the last thing that major central banks need right now

The tensions in the Middle East have been escalating significantly in the past week. And that is seeing the situation involving Israel and Hamas moving into unprecedented territory. In response, the geopolitical uncertainty finally caught up with markets yesterday.

Oil had a standout day in particular, with WTI crude rising by over 4%. That helped to see price erase the entirety of losses since the start of last week, holding near $78.50 now. In a similar move, Brent crude also jumped up by nearly 4% to settle at $81.30.

It may not look like much on the charts but it is something to be wary about in case things in the Middle East continue down this path.

The situation certainly didn’t play much into the Fed’s consideration and amid all the events yesterday, it may be one that is easy to overlook.

If energy prices begin spiking again, that could lead to spillover to price pressures elsewhere. If it is only for the short-term, then it will be easy for central banks and markets to brush it off. I mean, we’ve seen many a rally on geopolitical tensions before fading quickly over the years. It’s not anything new.

I’m not convinced we’ll see anything like a spike from the whole Russia-Ukraine ordeal. But if oil prices were to look towards $90 again, even in the short-term, it’s the last thing that major central banks need right now. That considering they are looking to cut rates and convince that they’re on top in the battle against inflation.

This article was written by Justin Low at www.forexlive.com.