Oil and gold prices climbed on Wednesday, August 12, as geopolitical tensions rose following shipping attacks by Houthis and the U.S., and a North Korean missile launch. Markets are simultaneously awaiting U.S. consumer price index (CPI) data to gauge the timing of potential Federal Reserve rate hikes.
Investors are balancing immediate security risks in the Middle East and Asia against looming macroeconomic data. While regional shares edged higher, the mood remains cautious. Market sentiment is described as lukewarm by analysts due to the overlap of geopolitical instability and the upcoming U.S. inflation report.
Energy and Bullion Gains Amid Shipping Attacks
U.S. crude rose 0.89% to $83.94 a barrel, while Brent advanced to $89.60 per barrel, up 0.78% for the day. These figures follow a volatile period where both benchmarks jumped about 5% on Monday and settled more than $1 higher on Tuesday, reaching their highest closes since July 31.
The upward pressure on oil is tied to instability in the Strait of Hormuz. According to reporting from Reuters, Iran has doubled down on its commitment to govern the strait, leaving the risk for oil prices skewed to the upside.
“The lack of substantial news or progress in talks, with Iran doubling down on its commitment to govern the Strait of Hormuz, is keeping the risk for oil prices skewed to the upside and U.S. indices on hold,”
Kyle Rodda, senior financial market analyst at Capital.com
Gold followed a similar trajectory, with spot gold gaining 0.46% to $4,387.03 an ounce. The rise in bullion typically reflects a hedge against geopolitical volatility and shifts in interest rate expectations.
Houthi Strikes and North Korean Missiles
The surge in commodity prices coincides with a series of military escalations. Yemen’s transport ministry reported that four crew members of an Egyptian-owned ship were killed Tuesday in an attack by Houthis. These are the first fatalities from a Houthi strike on shipping since the Iran war began on February 28. Concurrently, the U.S. military reported striking a container ship that was attempting to sail toward an Iranian port.
In Asia, a North Korean ballistic missile was fired off the east coast of the Korean Peninsula. This launch occurred just days before scheduled joint military exercises between Washington and Seoul. Additionally, Taiwan has condemned planned naval drills involving China and an Indonesian warship off its east coast.
Despite these clashes, President Donald Trump has made repeated claims of an imminent deal to end the war with Iran, though sources report the conflict shows no signs of ending.
U.S. CPI Data and Federal Reserve Expectations
The primary focus for global markets remains the U.S. consumer price index data. While the upcoming report will not reflect the most recent spike in energy costs, it is expected to signal whether the Federal Reserve will hike rates at its meeting next month.
According to a Reuters poll, annual CPI inflation is forecast to slow to 3.4% from 3.5% a month earlier. July consumer prices are expected to edge up 0.1%, following a 0.4% drop in June.
“Everyone’s got their eyes on the CPI report,” Skye Masters, head of markets research at National Australia Bank, said on a podcast. “If you do see the print coming in at zero, I think you’ll obviously see a reasonable rally in Treasuries as the market unwinds expectations for the Fed tightening.”
Skye Masters, head of markets research at National Australia Bank
Currency Shifts and Japanese Bond Records
Currency markets showed signs of stabilization following rare interventions by the United States and Japan. The Japanese yen remained mostly flat against the dollar, weakening slightly by 0.03% to 159.31 per dollar. This remains well off last week’s high of 155.20.
However, expectations of an early rate hike in Japan are putting significant pressure on government bonds.
- 5-year Japanese government bonds: Yield rose to a record high of 2.1%.
- 2-year Japanese government bonds: Yield reached a 31-year peak of 1.63%.
In other currency movements, the dollar index rose 0.04% to 99.85. The euro dipped 0.02% to $1.1538, and sterling weakened 0.01% to $1.3501.
Regional Equity Performance
Equity markets reacted with caution. MSCI’s broadest index of Asia-Pacific shares, excluding Japan, rose 0.5%. Japan’s benchmark Nikkei gauge traded flat as it reopened after a holiday. In Europe, futures showed a slight decline: the Euro Stoxx 50 was down 0.15% at 6,563, German DAX futures fell 0.12% to 26,444, and FTSE futures lost 0.25% to 10,825.
U.S. stock futures remained marginally positive, with S&P 500 e-minis up 0.03% at 7,750 as traders await the inflation print.
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