Oil extends gains after US-Iran escalation
Oil futures climbed more than 4% on Monday after military tensions between the US and Iran intensified over the weekend. Brent crude futures were at $78.86 and West Texas Intermediate crude futures were at $73.94 at the time of writing.
The market is weighing whether higher oil prices could add to inflation pressure in the third quarter. That has put Tuesday’s US Consumer Price Index release in focus.
Reuters says US struck targets in Iran, Tehran hit regional US bases
According to Reuters, US Central Command said American forces completed a new wave of airstrikes inside Iran on Sunday, hitting dozens of targets at multiple locations with precision munitions. On Monday, Iran’s Revolutionary Guard said it had attacked US military bases in Kuwait and Bahrain.
The source said Iran’s weekend missile strikes reached farther, with reports saying Qatar, Jordan and Oman were also affected. Oman sits at the mouth of the Strait of Hormuz, across the water from Iran.
Tehran said the latest round of attacks had rendered months of diplomatic efforts “futile.” Donald Trump had already said last Wednesday that the ceasefire was over. Mediators from Qatar and Pakistan are now trying to salvage the agreement and bring both sides back to talks.
Conflicting claims over the Strait of Hormuz
Washington and Tehran are giving different accounts of whether shipping through the Strait of Hormuz is still operating normally. Iran said over the weekend that the strait had been closed again after a vessel was hit for failing to follow an approved route. Trump said the passage remained open for commercial shipping, and US officials said 20 ships had been escorted through in the past 24 hours.
Kpler data pointed to a much slower flow. The ship-tracking firm said only six vessels passed through the strait on Sunday, the lowest number in five weeks. ING commodity strategists Warren Patterson and Ewa Manthey said the escalation had sharply reduced shipping volume through the waterway and revived concerns about tighter crude supply. They also warned that if the conflict returns to conditions seen at the start of the war, neighboring countries and their energy infrastructure could also become targets.
Gold falls while markets wait for July 14 CPI data
Safe-haven assets did not move in the same direction. Spot gold fell 1.1% to $4,066 per ounce. The market appears to still expect the US and Iran to return to negotiations and does not currently expect oil to revisit its March high.
Still, if oil keeps rising, inflation pressure could build. The source said the stance of new Federal Reserve Chair Kevin Warsh remains unclear, and the July 14 US CPI release is now the key data point for markets.