Brent crude has jumped above US$90 a barrel and surged around 25% over the past fortnight. Raymond Chan, Private Client Adviser and Head of the Asian Desk at Morgans, joined SBS World News on 18 July 2026 to explain what this oil price shock means for inflation, interest rates and the Australian dollar, and what investors should watch as the ASX reporting season approaches.
Key takeaways
- Investor sentiment is best described as cautiously optimistic, with resilient global earnings growth offsetting geopolitical and inflation risks.
- Brent crude's jump above US$90 a barrel is reviving inflation concerns and pushing back market expectations for further US rate cuts.
- A stronger US dollar, driven by higher US rates and safe-haven demand, is likely to weigh on commodities and the Australian dollar through the rest of 2026.
- Reporting season is shaping up as the key catalyst for Australian shares, with the market expecting around 13% earnings growth for FY26.
- Bank trading updates and China's Politburo meeting are two events worth watching closely this reporting season.
How would you describe investor sentiment at the moment?
Investor sentiment right now is best described as cautiously optimistic. On one hand, investors are dealing with a growing list of uncertainties: rising oil prices, ongoing geopolitical tensions in the Middle East, concerns over China's growth outlook, and the possibility of interest rates remaining higher for longer.
On the other hand, the global economy has proven remarkably resilient. Global PMIs remain above 50, and importantly, earnings growth is no longer just an AI and technology story. More industries are now contributing to economic growth and company profits.
So investors are nervous, but they're not panicking. The market is becoming more selective and increasingly focused on earnings rather than headlines.
What does the oil price surge mean for inflation and interest rates?
The immediate concern is that higher oil prices could slow the progress made on inflation. Energy prices flow through to transportation, manufacturing and ultimately consumer prices. If oil remains elevated for an extended period, central banks may find it more difficult to declare victory over inflation.
Earlier this year, many investors expected the US Federal Reserve to continue cutting rates. Today, markets are increasingly preparing for a higher-for-longer interest rate environment. That doesn't mean rates will rise again, but it does mean the market's expectations for further US rate cuts have largely been pushed back.
The key issue isn't just oil prices themselves, it is whether they become persistent enough to change inflation expectations.
Does this also mean the return of the US dollar?
Yes, and Raymond has been calling the second half of 2026 "the return of the US dollar." Higher US interest rates, ongoing geopolitical tensions and safe-haven demand have all helped support the greenback.
A stronger US dollar is typically a headwind for commodities, which are mostly priced in USD, and it can weigh on the Australian dollar.
For Australian investors, it also highlights the value of looking beyond the local market. The ASX 200 is still heavily dominated by banks and resource companies, so international exposure remains an important way to improve diversification and access opportunities that simply aren't available on the Australian market.
What are you watching closely ahead of reporting season?
Reporting season is, in Raymond's view, the most important catalyst for Australian equities over the next few months. While markets spend a lot of time talking about interest rates, inflation and geopolitics, over the long run it is earnings that drive share prices.
The market is currently expecting around 13% earnings growth for FY26, led primarily by resource and energy companies. Investors will be watching for three things:
- Whether companies can actually deliver on those earnings expectations.
- The outlook statements management teams provide for FY27.
- Any signs that higher interest rates or weaker consumer spending are affecting profitability.
Banks and resources in focus
Raymond will also be paying close attention to the banks' trading updates, particularly their comments on the housing market, mortgage demand and the net interest margin outlook. For resource companies, investors will be watching China very closely, especially ahead of the Communist Party Politburo meeting later this month and any indication of further economic stimulus.
What to watch this reporting season
Frequently asked questions
Why are oil prices rising in 2026?
Oil prices have risen due to a combination of ongoing geopolitical tensions in the Middle East and broader supply concerns, pushing Brent crude above US$90 a barrel and up around 25% over the past fortnight.
How do higher oil prices affect interest rates in Australia and the US?
Higher oil prices can push up transport, manufacturing and consumer prices, making it harder for central banks to continue easing. This has already led markets to push back expectations for further US rate cuts.
What is the outlook for the Australian dollar in 2026?
A stronger US dollar, supported by higher US rates and safe-haven demand, is likely to remain a headwind for the Australian dollar and for commodity prices more broadly through the second half of 2026.
What earnings growth is expected for the ASX reporting season in 2026?
The market currently expects around 13% earnings growth for FY26, led primarily by resource and energy companies, though this will be tested as companies report actual results over the coming weeks.
Should Australian investors diversify beyond the ASX 200?
Given the ASX 200's heavy concentration in banks and resource companies, many investors use international shares to diversify their portfolio and access sectors and opportunities that aren't well represented on the Australian market. This is general information only, and individual circumstances should be discussed with an adviser.
Speak with the Morgans Asian Desk
Rising oil prices, a stronger US dollar and an important reporting season all add up to a market environment where earnings, not headlines, will matter most. If you would like to discuss how these themes might affect your portfolio, contact a Morgans adviser or learn more about international share investing with Morgans.
DISCLAIMER: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents ("Morgans") do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.
