Fading US interest rate cut bets dash hopes of cheap UAE loans

RISING CRUDE PRICES TO PUSH INFLATION UP, NARROWING ROOM FOR RATE CUTS

- BY JUSTIN VARGHESE

A sharp spike in oil prices following escalating hostilities involving Iran is complicating the outlook for interest rates, raising fresh questions for households and investors from the UAE to the US.

Brent crude climbed above $87 a barrel after jumping more than 9 per cent in a single session. The surge followed US and Israeli strikes on Iran and Tehran's retaliation, alongside reported threats to shipping through the Strait of Hormuz, a passage that carries roughly 20 per cent of the world's crude supply.

The move has rattled global equity markets and reignited debate over whether central banks can proceed with anticipated rate cuts this year — a prospect closely watched by UAE homeowners and businesses facing elevated borrowing costs.

Inflation may pick up pace

Nigel Green, chief executive of Dubai-based deVere Group, said the scale and speed of the oil rally risk altering inflation expectations and delaying monetary easing.

"When oil surges with this magnitude and velocity, inflation gathers force rapidly," Green said. He warned that a sustained move towards $90 Brent would "fundamentally alter the inflation outlook and force a repricing of interest rate expectations."

"Markets had been positioning for lower borrowing costs, but this narrative is now under threat," he added, saying investors should prepare for rates "staying elevated well into 2026, and potentially moving higher if inflation proves stubborn."

Wait-and-see at Fed