# Oil over $100, and the ECB reaches for the cricket bat

_Brent is through $100 for the first time since July and European gas is back where it ended 2022. The ECB’s response was to raise rates, which will do nothing about either. Plus how much oil is really leaving the Gulf, Chinese trade data that embarrasses the deglobalisers, and the best news of the week._

Neil Woodford · 11 September 2026 · 9 min read

![Oil tankers alongside at a fuelling jetty](https://cdn.sanity.io/images/v3acfbvo/production/f62e3811878e93284fa5cfa6116e326e22c25a00-2418x1744.jpg?w=1600&fit=max&auto=format)

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A frustrating week. The energy market has once again reflected heightened tension in the Gulf, and crude has risen above $100 a barrel for the first time since [late July](https://www.noisecancelling.co/read/oil-at-100-shoppers-undeterred). European gas has continued to climb to a level last seen at the end of 2022. If that is sustained, it does not bode well for headline inflation anywhere, and those concerns have shown up in weak government bond markets in the US, Europe, Japan and the UK. Equities have in general followed the bond market lead, although AI-related sectors, and semiconductors in particular, have continued to rally from their July lows.

In geopolitics, there appears to be [a renewed effort to settle the war in Ukraine](https://www.rferl.org/a/ukraine-witkoff-kushner-russia-peace-negotiations/33848067.html), there have been [some important regional election results in Germany](https://www.cnbc.com/2026/09/07/afd-germany-economy-merz.html), and, disappointingly, [the usual pre-budget posturing farce](https://www.gov.uk/government/news/budget-to-move-power-and-money-out-of-westminster-and-into-every-postcode-around-britain) has started here. I will also cover some important Chinese trade data, some interesting comments on the future of AI from Arm Holdings’ chief executive and from Anthropic, and one piece of slightly left-field good news from the OECD.

## The Gulf, and how much is actually getting out

What has surprised me over the last few weeks is the extent to which a pretty limited exchange of fire between Iran and the US has moved the oil price. That is odd, not just against previous episodes of this kind but because there are consistent reports of growing volumes of oil and gas passing through the Strait of Hormuz.

![Brent is back through $100](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chart-weekly-10sep26-brent-f7c5124e57e4-light.png)

_$109.51, against $67.62 a year ago and $100.31 on 24 July, the last close above the round number. The war mark is where the whole of this repricing starts._

On Thursday, there was [another Bloomberg report](https://www.bloomberg.com/news/articles/2026-09-10/hormuz-fuel-exports-slow-recovery-keeps-prices-near-record) suggesting the volume of oil leaving by this route has grown to about 11mn barrels a day, from 7–8mn at the end of August. The public trackers do not agree with each other on this, and none of them agrees with Washington: Kpler’s reconstructed clearance averages 8.6mn barrels a day since mid-June, while [Goldman Sachs puts total Gulf crude and product exports at 15–16mn](https://finance.yahoo.com/energy/articles/goldman-says-hormuz-oil-flows-012118583.html), still 7–8mn below pre-war levels. The direction of travel, though, is not in dispute. _(Neil in the margin: Kpler is a commodities analytics firm that infers tanker cargoes from satellite and AIS ship-tracking data. Because vessels going dark or spoofing their positions is common in sanctioned trades, the trackers routinely disagree with each other and with official figures.)_

I also read a report earlier in the week about [a fleet of Qatari LNG tankers heading back towards the Persian Gulf](https://www.bloomberg.com/news/articles/2026-09-07/qatar-is-bringing-empty-lng-ships-home-in-possible-export-pivot), positioning for a resumption of LNG exports through this key choke point. Six empty carriers are in the Gulf of Oman or en route. This relatively positive news is additive to the pipelines that avoid the Strait entirely, which [the EIA puts at about 5mn barrels a day of capacity](https://www.eia.gov/international/content/analysis/special_topics/World_Oil_Transit_Chokepoints/): Saudi Arabia’s East-West line, the UAE’s Abu Dhabi pipeline, and Iran’s smaller Goreh-Jask route. _(Neil in the margin: Overland routes matter because they let barrels reach the sea beyond Hormuz, capping how much a closure could actually strand. At ~5mn b/d, though, they cover only a fraction of the roughly 20mn that normally transits the strait.)_

_[Embedded media](https://www.bloomberg.com/news/articles/2026-09-07/qatar-is-bringing-empty-lng-ships-home-in-possible-export-pivot)_

Volumes have yet to normalise completely, and global inventories will have to be rebuilt at some stage. But given how much has recovered from the early weeks of the war, it is odd that the oil price has risen so far in the last fortnight. My sense is that this may have as much to do with [China’s crude imports rebounding](https://oilprice.com/Latest-Energy-News/World-News/Chinas-Crude-Buying-Rebounds-as-Fuel-Exports-Jump-29.html) as with renewed tension. Much of the stress expected in the oil market after the war broke out in February was alleviated by a significant reduction in Chinese buying, which fell to a decade low of 7.1mn barrels a day in June. August was 8.93mn. I suspect it is the reversal of that situation, rather than the exchange of fire, that has made the oil price so sensitive.

## The inflation lesson already forgotten

Higher energy prices are not welcomed by policy makers or by financial markets whatever their cause. It is the hysterical reaction of the media and the economic consensus that I take exception to. The lessons that [might have been learned earlier this year](https://www.noisecancelling.co/read/inflation-myths) about how higher crude prices are transmitted into inflation outcomes in the UK have been forgotten already.

![European gas is back where it ended 2022](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chart-weekly-10sep26-ttf-5y-c6aa2fa67562-light.png)

_€82 a megawatt hour. The last time gas settled here was between Christmas and New Year 2022, on the way down from €339. The level is unwelcome; the shape is not 2022._

Pump prices respond quickly to commodity increases, but their impact on headline inflation is muted, both by the huge slice of tax in the retail price and by the low weight of transport fuel in the basket. Gas and electricity prices are known and capped to December: [Ofgem has already set the October cap at £1,723](https://www.ofgem.gov.uk/press-release/energy-price-cap-will-rise-4-october-2026), up 4%. If commodity prices are still elevated in November, at the next review, I expect the Prime Minister, who has made the cost of living the primary focus of his administration, to intervene in some way. As in 2022, there will be a policy response to sustained high household energy prices, albeit that the scope of the relief is likely to be constrained, because this government has already emptied the public kitty.

## Bonds, and the OBR’s conditioning assumptions

Higher energy prices have spooked global government bond markets. Treasury yields have risen this week and gilts have followed suit, which, [as I have argued in a number of recent pieces](https://www.noisecancelling.co/read/deficits-gilts-and-the-cost-of-living), is exactly what the long-term relationship between US and UK government bond yields would lead you to expect. It is very unwelcome, and while it is going on it will seed all sorts of apocalyptic stories about what is about to happen to the UK economy.

![Every big bond market has repriced, not just ours](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chart-weekly-10sep26-yields-53a9822a1c7d-light.png)

_Over the year: Japan up 131bp, the US up 77bp, Germany up 75bp, the UK up 43bp. The gilt market is the least bad performer in this group, which is not the story you will have read this week._

It will create problems for the new Prime Minister and his Chancellor, whose hubristic promises now look even more ludicrous. But this is the product of a commodity price spike that could unwind in a matter of weeks, just as it did through the summer.

While energy prices stay where they are, they will cause acute problems for the government. The OBR will rework its numbers and amend its conditioning assumptions for much higher gas prices and higher gilt yields than it used in its March models, which will have a significant impact on its judgement of the fiscal headroom in 2029/30 ahead of [the budget on 28 October](https://www.gov.uk/government/news/budget-to-move-power-and-money-out-of-westminster-and-into-every-postcode-around-britain). Another reminder to this administration that so many of the things they speak about are decided for them, not by them. _(Neil in the margin: The OBR bakes market prices — gas, gilt yields, exchange rates — into its forecast at a fixed cut-off date. Because these feed mechanically into projected debt interest and spending, a spike near a fiscal event can wipe out headroom without any policy change at all.)_ _(Neil in the margin: The margin by which the Chancellor is forecast to meet the government’s own fiscal rules in the target year. It is a modelled residual, not cash in hand — which is why a bond sell-off can 'cost' billions on paper overnight.)_

_Related:_ [The new Chancellor’s misdiagnosis](https://www.noisecancelling.co/read/the-new-chancellors-misdiagnosis) — John Healey's first major speech as Chancellor, delivered in a Coventry factory weeks before his budget, was a torrent of platitudes rather than an accurate diagnosis of what ails the economy.

This latest chapter of the war, and what it has done to energy prices, is not what I predicted. I continue to believe the spike will not be sustained. Beyond the rising volume of crude leaving the Gulf, and the possibility that Qatari LNG will soon follow, there is still a chance of a settlement in Ukraine, and of one in the Gulf, where conversations between the two sides continue through intermediaries.

## The cricket bat treatment

On Thursday, in yet another error of judgement, [the ECB raised rates by 0.25% to 2.5%](https://www.ecb.europa.eu/press/pr/date/2026/html/ecb.mp260910~314e508016.en.html). The decision came with a good deal of hot air about central bank credibility and supply-side effects, but I still struggle to see how raising rates because energy prices have risen can be anything other than a mistake. It will have no impact at all on those higher prices, which act like a tax on consumers and businesses. It will only weaken demand in an economy the ECB itself acknowledges is struggling to grow: [its updated forecast](https://www.ecb.europa.eu/press/projections/html/ecb.projections202609_ecbstaff~8e340fc69d.en.html) is 0.9% for 2026, 1.4% for 2027 and 1.5% for 2028.

As for the US, today’s inflation data, with a consensus of 3.4% on the year, will have an important bearing on what the Fed decides on Wednesday. I continue to believe it will hold off, while making appropriately hawkish noises to accompany the decision, because inflation remains above target. That is a non-consensus view: the market puts the probability of a rise at about 60%.

In the UK, I have been encouraged by a number of recent comments from the Governor, who has, among other things, highlighted the policy tightening already taking place here because of higher market interest rates. [He told the Treasury Select Committee](https://www.gbnews.com/money/bank-of-england-mortgage-rates-rising-g7) that UK mortgage rates are about 75 basis points higher than they were when the conflict broke out, the largest increase in the G7 with the possible exception of Japan. [Three members of the MPC voted for an increase in July](https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2026/july-2026) and will undoubtedly do so again, but I believe Bailey and the rest of the committee will hold fire, and that [rates will not be going up](https://www.noisecancelling.co/read/why-i-can-see-uk-interest-rates-below-3-next-year). _(Neil in the margin: A basis point is one hundredth of a percentage point, so 75bp is 0.75%. Bailey's argument is that market rates have already done tightening the MPC would otherwise have to deliver itself.)_

I can see no justification for higher rates. The effective tax increase that higher energy prices have already inflicted on the economy, combined with higher market interest rates, does not need to be compounded by higher official rates. [Higher rates make second-round effects more likely, not less](https://www.noisecancelling.co/read/still-don-t-get-it-why-higher-rates-make-second-round-effects-more-likely). Just as a cure for a headache does not entail bashing it with a bat, neither should an oil price shock be met with the economic equivalent of the cricket bat treatment.

## China is not deglobalising

Changing tack. [Chinese trade data this week](https://www.bnnbloomberg.ca/business/international/2026/09/08/chinas-exports-pick-up-in-august-jumping-25-as-its-trade-surplus-widens/) showed exports up 25% year on year in August, which puts China on track for an even bigger annual trade surplus in 2026 than the $1.2 trillion it ran in 2025. Imports also rose strongly, up 28.2%. That growth rate highlights, once again, contrary to media and WEF deglobalisation piffle, that the world is globalising at an increasing rate. _(Neil in the margin: The World Economic Forum, host of the Davos gathering — shorthand here for the elite consensus Neil enjoys puncturing. His counter is that record two-way Chinese trade flows point to more integration, not less.)_

![Deglobalisation, allegedly](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chart-weekly-10sep26-china-surplus-1a6c72557369-light.png)

_March is the war: an oil import bill that jumped $61bn in a month. Everything since is the surplus rebuilding, and August’s $119.1bn is the third biggest month in this window, behind June and January._

## Two views of AI

There has been some interesting commentary this week about how AI will affect the world. Arm Holdings’ chief executive, who should have a reasonable grasp of what AI means for the global economy, said in [a wide-ranging BBC interview](https://www.bbc.co.uk/news/articles/c0m39g7xzevo) that AI will find a cure for cancer “in our lifetime”, something humans alone could not. He stepped down from AstraZeneca’s board in April, so he is well placed to opine on it. He also said humanoid robots would be widely deployed within five years, that the binding constraint on all of this is a shortage of chips, and that while much would change profoundly, forecasts of mass redundancy for humans are overstated.

_[Embedded media](https://www.bbc.co.uk/news/articles/c0m39g7xzevo)_

Anthropic has also published a paper from its Anthropic Institute, [Economic Scenarios for Transformative AI](https://www-cdn.anthropic.com/files/4zrzovbb/website/cf58f84d46a4a76bf5a5b039ac695fba6b80041c.pdf). I will not replicate a serious paper here, but this is its abstract:

> In the model, AI automates a growing share of cognitive work, raising productivity and displacing workers who must search for jobs in other occupations… Under modest change, AI adds less than half a point to GDP growth by 2030. In the extreme change scenario, AI performs almost half of today's cognitive work by 2030: GDP growth then rises to 15% per year, the labor share of income falls from 60 to 45%, and nearly one in five cognitive workers is unemployed… the median respondent's answers are consistent with our substantial change scenario in which, by 2030, GDP rises by 8% and cognitive employment declines by 4%.
>
> — [The Anthropic Institute](https://www-cdn.anthropic.com/files/4zrzovbb/website/cf58f84d46a4a76bf5a5b039ac695fba6b80041c.pdf)

There is [an interactive version of the model](https://www.anthropic.com/institute/econ-scenarios). I plan to do a bit more work on this and add my own assumptions to see what kind of world they lead to in 2030. I will keep you posted.

## The best news of the week

As an antidote to a pretty depressing week for financial markets, I will sign off with something positive, uplifting and possibly unexpected. [The OECD published its latest PISA round this week](https://www.oecd.org/en/publications/pisa-2025-results-volume-i_73451bc5-en.html), the international comparison of 15-year-olds’ attainment that is updated every three years. This is what it shows for the UK.

![England is the outlier](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chart-weekly-10sep26-pisa-391502af97a5-light.png)

_Above the OECD average in every domain in England and Northern Ireland. Wales is below it in all three._

The FT’s headline was “Why England stands out in a world of slumping scores”, which is concerning in some respects, but for children in English schools the message is unequivocally good. [England is now eighth in the world in science, ninth in reading and tenth in maths](https://www.tes.com/magazine/news/general/pisa-2025-scores-revealed-england-uk-ranking), and its science score of 516 is the highest since 2012. The OECD average fell in all three domains.

_[Embedded media](https://x.com/jburnmurdoch/status/2097277608912208119)_

Of more concern, and especially for those like the Prime Minister who seem to believe that devolution is universally positive, it appears that devolving education has been an unmitigated disaster for children in Scotland, Northern Ireland and particularly in the socialist republic of Wales. [Wales sits below the OECD average in all three domains](https://assets.publishing.service.gov.uk/media/6aa0073962ec7fe7bedf5160/pisa-2025-national-report-for-england.pdf); England sits above it in all three, and by some distance.

## What to look out for next week

[July GDP landed this morning](https://www.ons.gov.uk/releases/gdpmonthlyestimateukjuly2026) at 0.4% on the month, against a consensus of no growth at all. I will look at it properly in next week’s update.

Next week is a big one for macro data on both sides of the Atlantic. In the UK we have average earnings and labour market data on Tuesday, inflation numbers on Wednesday and the MPC rate decision on Thursday. In the US there is a large amount of data on Wednesday, but the highlight will be the Fed’s interest rate decision the same day. Thursday brings yet more labour market data.

The recent lull in corporate results starts to unwind, with a good number of mid and small caps reporting alongside a few larger companies. [Next reports on Thursday](https://www.nextplc.co.uk/investors), and its chief executive’s commentary is consistently the most informative account of the UK economy and the retail industry that you will read in a results statement. It is always worth the time.