Oil Prices Rise As Markets Await US Inflation Data

NEW YORK: (News Desk) – Oil prices extended their gains on Wednesday while global stock markets traded mixed as investors awaited fresh US inflation data that could influence the Federal Reserve’s next interest-rate decisions.

Markets remained cautious ahead of the latest Consumer Price Index (CPI) report, following data released last week showing that the US economy shed more than 20,000 jobs in the previous month, adding to signs of a cooling labour market.

Inflation, however, remains above the Federal Reserve’s 2% target, with the economic impact of the Iran conflict adding further pressure to energy and consumer prices.

At the Fed’s July meeting, three policymakers favoured raising interest rates, dissenting from the decision to keep borrowing costs unchanged. Investors are increasingly pricing in a rate increase before the end of the year, with some anticipating the possibility of two hikes.

Analysts noted that another inflation report and a further employment report will be released before the Fed’s next meeting in September.

Hormuz Tensions Keep Oil Prices Elevated

Rising crude prices are strengthening expectations that the Federal Reserve could maintain a tighter monetary stance, while uncertainty over efforts to reopen the Strait of Hormuz continues to support oil prices.

A statement from Pakistan’s defence minister that Washington and Tehran were “close to some sort of arrangement” briefly raised hopes for progress on Tuesday. Those expectations later weakened as both sides maintained demands for compensation over the five-month conflict.

The US military also said a US helicopter fired missiles at the engine room of a Panama-flagged cargo vessel on Tuesday after the ship attempted to breach the US blockade of Iranian ports.

Meanwhile, reports that Iran and Oman were holding advanced discussions over reopening the Strait of Hormuz to some maritime traffic produced little immediate reaction in financial markets.

Both major crude benchmarks rose on Wednesday and have gained approximately 14% over the past week.

Forex.com analyst Fawad Razaqzada said oil prices had surged because the Strait of Hormuz remained effectively closed and there had been limited progress in US-Iran negotiations.

He cautioned that discussions between Oman and Iran should not be interpreted as a breakthrough, noting that Tehran had indicated the waterway would remain closed until its conditions were met.

Razaqzada said the positions of Washington and Tehran suggested that any agreement remained some distance away, keeping the risks tilted towards further increases in oil prices.

Asian Markets Trade Mixed

Global equity markets fluctuated ahead of the US inflation figures, although South Korea’s Kospi enjoyed another strong session as technology stocks recovered from heavy losses recorded in July.

The Kospi gained more than 3%, supported by chipmakers SK hynix and Samsung Electronics, which had been among the biggest casualties during the earlier technology sell-off.

Investor sentiment was also supported by strong earnings from US artificial intelligence companies CoreWeave and Super Micro Computer, easing some concerns surrounding the massive investment cycle in AI infrastructure and questions over when companies will begin generating sufficient returns.

Tokyo, Shanghai, Taipei, Manila and Jakarta markets also advanced, while Hong Kong, Sydney, Singapore and Wellington moved lower.