Oil Shock and Rate Decisions Squeeze National Economies

Brent crude closed Friday at US$107.58 a barrel. Eurozone inflation reached 3.8% in September, and the Federal Reserve signaled it was leaning toward holding interest rates steady. The briefing said elevated oil prices and high Treasury yields were squeezing borrowers, while net energy importers faced higher fuel costs and inflation pressure.

Growth and household costs

China’s economy grew 4.5% year on year in the third quarter of 2026, beating the 4.4% forecast and up from 4.3% in the second quarter, the National Bureau of Statistics said. September industrial production rose 5.5%, compared with a 5.4% forecast. Retail sales increased 1.1%, against a 0.5% forecast. Unemployment came in at 5.2%, below the 5.3% forecast.

Eurostat data showed consumer prices in the Eurozone rose 0.6% in September from August and 3.8% from a year earlier. Core inflation stood at 2.5%. The annual rate for September was the highest since September 2023. The briefing calendar also showed core and harmonised inflation each rising 0.2% on the month.

The euro area’s goods trade balance swung from a €10.7 billion surplus in July to a €16.1 billion deficit in August, about US$18.1 billion. The European Central Bank raised its deposit rate to 2.50% in September and scheduled its next meeting for 29 October.

Central banks and market pressure

Federal Reserve Chair Kevin Warsh said hotter inflation hadn’t changed his outlook. The briefing said the Fed was leaning toward holding rates steady. In September, the central bank raised rates to 3.75%-4%. Polymarket prices as of 11:18 p.m. ET on 18 October put the chance of no change at the Fed’s October meeting at 95.9%, against 4.1% for a 25-basis-point increase. Traders had put about US$50,000 into the market. These are bets, not polls.

For the ECB meeting on 29 October, market prices put the chance of no change at 96.2% and a 25-basis-point increase at 3.4%. About US$629,000 had traded. Those figures reflect market positions, not a poll of voters or a central-bank decision.

The U.S. 10-year Treasury yield stood at 5.085%, up 1 basis point on Friday, according to one report. A separate live-market board listed it at 4.6760%, down 0.17% on 19 October. The Federal Reserve reported that U.S. industrial production rose 0.7% month on month in September, against a 0.4% forecast, while capacity utilization reached 76.9%. The New York Fed’s services index dropped to -20.7 in October from -8.7, pointing to a sharper contraction.

Oil, currencies and markets

Brent traded near US$106 on Monday, after closing Friday at US$107.58, a 3.4% daily gain. The briefing linked tight supply to disruption around the Strait of Hormuz, which it called the world’s most important oil chokepoint. If Brent stays above US$105 for more than a few sessions, the briefing said, central banks could reassess their approach.

Oil exporters such as Colombia and Mexico could get a fiscal boost, the briefing said, while net energy importers faced higher fuel costs and inflation pressure. Stronger Chinese growth could support commodity exporters including Brazil, Chile and Peru. The real strengthened 0.67% against the dollar on Friday, while the Mexican peso weakened 0.43%.

The ICE Dollar Index fell 0.2% on Friday to 101.84, and the euro ended the week near US$1.12. Dollar-yen traded near 158 on Monday. The briefing listed the oil-price path, the Strait of Hormuz disruption, Warsh’s Fed communications, China’s commodity demand and exports, and the ECB meeting as matters to watch. It described the outlook as a supply-side oil shock, with no evidence that the global economy was breaking down.