Middle East Tension Boosts Oil Prices While Pressuring Gold
While escalating clashes between the US and Iran drove up crude oil prices, growing inflation concerns and rate hike expectations pulled gold down to its lowest level in three weeks.
While the escalation of clashes between the US and Iran in the Middle East drove up oil prices in global markets, inflationary pressures and interest rate hike expectations caused gold prices to drop to a three-week low.
Rise in Oil Prices
The barrel price of Brent crude rose by more than 2% to reach $96.59. Meanwhile, the barrel price of US West Texas Intermediate crude increased by 1.73% to $91.78.
Military Statements and Regional Developments
The US Central Command stated that the strikes were carried out following preparations by the Iranian Revolutionary Guards in the Strait of Hormuz. The United Kingdom Maritime Trade Operations reported that a tanker had been hit.
Assessments by Leaders and Experts
US President Donald Trump stated that they control the Strait of Hormuz and that the Iranian economy is in collapse. Financial expert Edward Rosenberg said that oil prices would remain high if the war drags on.
Three-Week Low in Gold Prices
The price of gold fell by 0.6% to $4,290 per ounce, seeing its lowest level since August 7. December gold futures also dropped by 1% to $4,350.
Inflation and Interest Rate Expectations
Expectations that high oil prices will increase inflationary pressures and that the US Federal Reserve may raise interest rates negatively impacted gold prices. DHF Capital CEO Bas Koeyman evaluated this situation.
Data Focused on by Markets
According to CME FedWatch data, markets are pricing in a 67% probability of a rate hike by the US Federal Reserve at its meeting this month. Markets are awaiting the ADP and non-farm payrolls data.