Oil prices rose to their highest levels in more than 6 weeks, on Thursday, July 23, as the military confrontation between the United States and Iran escalated and maritime threats extended to the Red Sea and the Bab al-Mandab Strait. Economic data confirmed the decline in gold prices in conjunction with oil leaving its previous levels, following increased inflation fears and high expectations of tightening US monetary policy.
Jump in crude prices
Brent crude futures rose 2.1% to $96.06 a barrel, while U.S. West Texas Intermediate crude climbed 1.5% to $88.11, after touching the highest levels recorded since June 8.
Security reports reported growing concern in global markets due to the restriction of tanker movement in the Straits of Hormuz and Bab al-Mandeb, causing higher transportation and insurance costs and the risk of delayed supplies.
Increase in U.S. inventories
Data from the U.S. Energy Information Administration showed that commercial crude inventories rose by 2 million barrels during the week ended July 17 to reach 411.7 million barrels, contrary to analysts' expectations of a decline. The administration indicated that U.S. refineries were operating at 96.1% of their capacity and processing 17.1 million barrels per day, along with an increase in imports by 117,000 barrels per day.
Gold Declines and Interest Rate Hikes Rise
Spot gold fell to $4,124.70 an ounce, down from a two-week high of $4,165.87, and U.S. futures for August delivery fell 0.6% to $4,125.30.
Research experts confirmed that oil gains boosted inflationary pressures and expectations of a US interest rate hike, limiting the precious metal's gains despite the dollar index falling 0.14% to 100.97 points.
The FedWatch tool showed markets pricing in a 34.7% probability of a rate hike at the next US Federal Reserve meeting, with the probability of at least one hike by September rising to around 78%.
The US two-year Treasury yield was at 4.31%, near a 17-month high, amid anticipation of the European Central Bank meeting and developments in other precious metals such as silver, which recorded $59.56 an ounce and platinum at $1642.