Brent climbs above $89 as Strait of Hormuz tensions fuel supply concerns….
Oil prices extended their gains on Wednesday, while global stock markets traded mixed as investors awaited the latest US inflation figures for clues about the Federal Reserve’s next interest-rate decision.
Brent crude rose 0.6 per cent to $89.40 a barrel, while West Texas Intermediate gained 0.7 per cent to $83.78.
Both benchmark contracts have climbed about 14 per cent over the past week, driven largely by continued disruption around the Strait of Hormuz and uncertainty over efforts to reopen the key shipping route.
Market participants are closely watching the US Consumer Price Index, coming days after data showed the world’s largest economy lost more than 20,000 jobs last month, pointing to a weakening labour market.
However, inflation has remained above the Federal Reserve’s two per cent target for more than five years, with the economic impact of the Iran conflict adding to price pressures.
At the Fed’s July meeting, three policymakers dissented from the decision to keep interest rates unchanged and backed an increase. Investors are now pricing in the possibility of a rate hike before the end of the year, with some expecting two increases.
Analysts noted that another inflation report and jobs data will be released before the Fed’s September meeting, potentially giving policymakers a clearer picture of the direction of the US economy.
Oil prices have also come under upward pressure from the lack of a breakthrough in negotiations between Washington and Tehran over reopening the Strait of Hormuz.
While Pakistan’s defence minister said Tuesday that the United States and Iran were “close to some sort of arrangement”, hopes of an immediate breakthrough later weakened after both sides maintained demands for compensation linked to the five-month conflict.
The United States military also said a US helicopter fired missiles into the engine room of a Panama-flagged cargo vessel that attempted to breach the American blockade of Iranian ports.
Meanwhile, reports that Iran and Oman were holding advanced discussions on reopening the Strait to some maritime traffic had limited impact on markets.
Analysts cautioned that negotiations do not necessarily translate into an immediate reopening of the strategic waterway.
“Crude oil prices have surged in the last few days because the Strait of Hormuz remains effectively shut,” Forex.com analyst Fawad Razaqzada said, adding that the positions of Washington and Tehran suggested any agreement could still be some way off.
He said the uncertainty meant risks remained tilted towards further increases in oil prices.
Mixed performance across global markets
Equity markets were uneven ahead of the US inflation release.
South Korea’s Kospi gained more than three per cent, led by chipmakers SK hynix and Samsung, as the market continued to recover from heavy technology-driven losses recorded in July.
Strong earnings from US artificial intelligence companies CoreWeave and Super Micro Computer also helped ease concerns over the sustainability of the massive investment boom in the sector.
Tokyo, Shanghai, Taipei, Manila and Jakarta recorded gains, while Hong Kong, Sydney, Singapore and Wellington declined.
At about 0210 GMT, the Nikkei 225 was up 0.1 per cent at 67,002.60, while Hong Kong’s Hang Seng fell 1.1 per cent to 25,375.72.
The Shanghai Composite gained 0.1 per cent to 3,939.29.
In currency trading, the euro weakened to $1.1539 from $1.1542, while the pound slipped to $1.3505 from $1.3506. The dollar rose to 159.35 yen from 159.27 yen.
In the United States, the Dow Jones Industrial Average fell 0.3 per cent to close at 53,791.85, while London’s FTSE 100 declined 0.2 per cent to 10,844.19.
