Aramco hit lifts oil to a six-week high and fuels hike talk

Good morning. US markets were shut for Labor Day, but oil kept moving. The US and Iran traded blows again, and reports of fresh attacks on Saudi Aramco facilities sent Brent and WTI to their highest in about six weeks.

That feeds straight into the inflation story. US gasoline prices set a Labor Day record, and diesel is tight, with Ukrainian strikes on Russian refineries making it worse. European natural gas also rose on worries over Qatari supply, and Iran has promised tighter control of the Strait of Hormuz. The question is how much of this shows up in Friday's August consumer price report.

The Fed backdrop has firmed. After a jobs report three times forecasts, markets price around a 60% chance of a September hike, and UBS flipped its call to two hikes this year, in September and December. Recent comments from Governor Waller and Chair Warsh are being read as a signal that inflation now has to come in clearly cool for the Fed to avoid a hike.

Elsewhere, the yen hit a six-month high and Japan's Nikkei rose 1.8% on chip stocks. US equities are catching their breath about 1% below a record, and the mood looks likely to stay cautious until Friday's CPI.