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The global benchmark for oil prices jumped by about 5% as traders braced for a possible new US offensive against Iran, piling pressure on equities already rattled by climbing borrowing costs.

Brent was over $105.2 a barrel in early afternoon trading in Europe, while US benchmark West Texas Intermediate (WTI) gained 5.1% to around $92.75.

American media reports on Wednesday indicated the Pentagon had instructed US Central Command to complete preparations for a possible resumption of "major combat operations" against Iran, citing US officials.

No date has been set for any strikes, which could hit Iranian energy, infrastructure and nuclear sites, according to the report.

An Israeli official told Axios that the chances of an attack before next month's US midterm elections were "not high but we don't rule it out".

Reportedly, even supporters of the strikes did not expect them to bring Iran to the negotiating table or restore safe passage through the Strait of Hormuz, but hoped they would help US President Donald Trump project strength before the midterm elections.

The US and Iran have yet to reach a deal to end their war, which began in February.

Supply worries were already mounting. Tehran has stepped up attacks on tankers in the Strait of Hormuz, the Houthis denied claims they had lost key territory, and senior oil officials have warned that global reserves are running worryingly low.

Output has also been hit in the US, where producers have shut down more than 500,000 barrels a day of Gulf of Mexico production ahead of Hurricane Isaias.

Crude prices had fallen earlier in the week on signs that Middle East exports were heading back towards pre-war levels and after G7 nations agreed to tap their stockpiles.

On Wednesday, the International Energy Agency (IEA) said its members supported speeding up oil stock releases already pledged in March, prioritising diesel where possible.

Stocks slide as inflation fears return

European stock markets opened lower on Thursday as the jump in oil prices revived inflation concerns. At the open, Germany's DAX fell 0.76% and London's FTSE 100 dropped 0.75%. France's CAC 40 was down 0.64%, while the Euro Stoxx 50 lost 1.06%.

Higher oil prices also added to upward pressure on government bond yields, which have reached multi-year highs. In the morning, France's 10-year yield stood at 4.89% and Germany's at 3.48%, while the 10-year US Treasury yield hovered near a multi-decade high at 5.32%.

Rising yields tend to weigh on stocks, as higher borrowing costs can squeeze company profits and make bonds more attractive to investors.

Minutes of the US Federal Reserve's September meeting, released on Wednesday, showed most officials considered another rate hike likely to be appropriate before the end of the year.

The Fed hiked rates in September for the first time since July 2023, by a quarter of a percentage point to a range of 3.75% to 4%, as US inflation remains above its 2% target.

Markets across Asia fell, including Tokyo, Hong Kong, Sydney, Shanghai, Singapore, Seoul, Wellington, Taipei and Manila.

Samsung shares dropped despite the company estimating a 782.5% rise in third-quarter operating profit to 107.4 trillion won (about €71.8 billion), driven by higher memory chip prices.

On Wednesday, Wall Street's S&P 500 slipped 0.2% a day after hitting an all-time high. The Dow Jones Industrial Average lost 0.7%, while the tech-heavy Nasdaq Composite fell 0.2% from its record.

Tech shares pulled back as investors prepared for earnings season, with high valuations and vast spending on artificial intelligence putting profits under scrutiny.

The euro stayed near the 17-month low it hit on Monday, weighed down by concerns over France's high debt levels. On Thursday morning, the euro traded at $1.12, the pound at $1.32 and the dollar at ¥158.13. Gold edged up to $4,143.90 an ounce.

Investors were also awaiting the European Central Bank's account of its latest policy meeting for clues on whether it will hike rates again.