OPEC+ Cuts Send Oil Prices Higher, Fueling Inflation Fears
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Global oil prices climbed sharply on Wednesday after OPEC+ announced an extension of voluntary production cuts through Q3 2025, intensifying fears that energy-driven inflation may reemerge in major economies.
Brent crude rose by 2.1% to $89.80 per barrel, while West Texas Intermediate (WTI) climbed 2.3% to $86.25. This marks the highest level since early May, following weeks of muted price action.
The rally was triggered after Saudi Arabia and Russia jointly confirmed that their voluntary cuts—each slashing 1 million barrels per day—will remain in effect until at least the end of September. Additional reductions from Iraq and the UAE were also reaffirmed, putting total OPEC+ output constraints at nearly 4.5 million barrels per day.
The oil alliance said the decision was necessary “to stabilize global energy markets amid ongoing geopolitical and economic uncertainty,” pointing to weak demand in China and persistent overhangs in OECD inventories.
However, the announcement reignited concerns among investors and policymakers about inflation. Crude oil is a major driver of input costs across industries, and higher prices could complicate central bank efforts to tame inflation while maintaining growth.
“Oil is once again at the center of the inflation conversation,” said Daniel Murray, chief macro strategist at London-based firm JEC Capital. “This could delay rate cuts in Europe and the U.S. if energy costs start creeping into core inflation readings.”
The news also had immediate ripple effects across sectors. Airline stocks fell, including Delta Air Lines and Lufthansa, both down around 1.5% in intraday trading. On the flip side, energy companies such as ExxonMobil, Shell, and Saudi Aramco saw gains of over 2%, buoyed by rising margins.
In currency markets, oil-linked currencies such as the Canadian dollar, Norwegian krone, and Russian ruble strengthened against the U.S. dollar. Meanwhile, the greenback held firm overall, as safe-haven demand continued.
Emerging market economies, particularly in Asia and Africa, could feel the pinch if higher oil prices persist. Many rely heavily on fuel imports and have already struggled with currency depreciation and debt servicing costs in 2025.
Analysts are now watching for follow-up moves from major central banks. The U.S. Federal Reserve and European Central Bank are expected to tread carefully, especially with inflation expectations being highly sensitive to commodity shocks.
Market participants will also closely monitor U.S. crude inventory data and China’s July energy demand outlook for further cues. For now, the OPEC+ signal has made one thing clear: energy prices are back on the radar.
