Oil prices have climbed to their highest level in a month, as traders assessed a significant reversal by the U.S. President on the issue of shipping fees in the Strait of Hormuz, while further vessel attacks by Iran in the strait introduced new threats to energy flows. Lead prices fell due to a massive delivery of the metal by Trafigura into LME warehouses. Gold prices advanced as weaker-than-expected U.S. inflation data tempered market expectations for Federal Reserve interest rate hikes.
Crude Oil: Middle East Conflict Escalation Drives Prices to One-Month High
Oil prices reached a one-month peak on Tuesday, with traders responding to a major policy reversal by the U.S. President regarding shipping tolls in the Strait of Hormuz. Concurrently, additional attacks on vessels by Iran in the strategic waterway posed renewed risks to the movement of energy supplies.
WTI crude futures increased by 1.5%, settling above $79 per barrel after surging nearly 4% earlier in the session. Brent crude closed near $85 per barrel.
Following pressure from Gulf region allies, the U.S. President posted on social media Tuesday, abandoning a plan announced just a day earlier to impose a 20% fee on cargo transiting the Strait of Hormuz.
This shift was welcomed by shipping firms, which had been deeply concerned by the breakdown of a U.S.-Iran ceasefire agreement and the prospect of further disruptions at the world's most critical energy chokepoint. It also highlighted the challenging position of the U.S. administration: escalating hostilities with Iran, coupled with Tehran's refusal to relinquish control over the Strait of Hormuz, is exerting upward pressure on oil prices.
Ryan McKay, a senior commodity strategist at TD Securities, stated, "Heavy short-covering by fund managers, combined with potential large-scale buying by commodity trading advisors, will only amplify the rally. We need a rapid de-escalation, otherwise the energy market's reaction to a second round of this war could be significantly more severe."
The President's change of stance coincided with new conflict reports across the Middle East. ABC News, citing a U.S. official, reported that U.S. airstrikes against Iran had continued for several hours. Iran's semi-official Fars news agency reported multiple explosions heard on Qeshm Island. The semi-official Mehr news agency stated that Iran had launched missiles and drones toward Kuwait and Bahrain. Oman reported that a tanker had been attacked just outside its territorial waters.
Analysts at Capital Economics, including David Oxley, wrote, "As long as the U.S. blockade remains, the risk rises that Iran retaliates by disrupting other Gulf states' oil exports for longer. Crucially, the global oil market is now more vulnerable to further supply shocks than it was earlier this year."
August WTI crude rose 1.5% to settle at $79.34 per barrel.
September Brent crude gained 1.7% to settle at $84.73 per barrel.
Base Metals
Lead prices declined after Trafigura Group made a record delivery of the metal into London Metal Exchange warehouses, pushing inventory to its highest level in 14 years.
According to informed sources, the commodity trader executed a large delivery in Singapore, increasing monitored global LME lead stockpiles by 80,700 tonnes. This marks the largest single-day inventory increase on record since 1970.
Lead is the only LME industrial metal to record a loss this year, down nearly 8%. In contrast, tin leads the gains among industrial metals with a 33% increase.
At the close, three-month LME copper advanced 0.8% to $13,643 per tonne.
LME aluminum edged up 0.2% to $3,177 per tonne.
LME nickel was largely flat at $16,765 per tonne.
LME zinc gained 0.9% to $3,598.50 per tonne.
LME tin climbed 2.3% to $53,813 per tonne.
LME lead slipped 0.1% to $1,866 per tonne.
Precious Metals
Gold prices rose as softer-than-anticipated U.S. inflation data alleviated concerns that the Federal Reserve would need to raise interest rates in the near term to curb price pressures.
The price of gold initially jumped as much as 2.5% before paring gains. Federal Reserve Chair Kevin Wash, testifying before Congress on Tuesday, downplayed the significance of the latest inflation figures, cautioning against reading too much into a single data point.
Following the U.S. inflation report, markets scaled back bets on imminent Fed rate hikes. This pushed U.S. Treasury yields and the dollar lower, providing a lift to gold prices.
As of 4:36 PM Eastern Time, spot gold was up 1.2% at $4,050.97 per ounce.
Spot silver increased 1.8% to $58.68 per ounce.
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