Crude oil prices surged as market concerns intensified over a potential full-scale war between the US and Iran, threatening transit through the Strait of Hormuz. Copper prices fell as escalating Middle East tensions threaten global economic growth and the demand outlook for industrial metals. Gold rebounded as investors bought the dip after prices fell below a key level.
Crude Oil: WTI Rises on Fears of Escalating US-Iran Conflict
Crude oil prices soared on growing market fears that the United States and Iran could return to full-scale war, threatening the passage of vessels through the Strait of Hormuz.
The global benchmark Brent crude rose approximately 4.6%, settling around $88, marking its largest weekly gain since April. A report from Axios stating the US is sending dozens of refueling tankers to Israel reinforced market expectations of a potential near-term escalation in the conflict, contributing to further price increases on Friday.
This development added further bullish momentum to oil prices, which was already present following an Iranian attack on water and power plants in Kuwait that damaged several power generation units.
"No one wants to be short going into the weekend," said Darrell Fletcher, Managing Director of Commodities at Bannockburn Capital Markets.
As the escalation has reignited concerns over transit through the Strait of Hormuz, oil prices have surged to near one-month highs, partially recovering from a roughly 30% decline in the second quarter. Prior to the conflict, about one-fifth of the world's oil passed through this critical chokepoint.
The conflict is also affecting supplies of fuels like diesel and gasoline, pushing US refinery profit margins to record highs. Canada's largest refinery plans to shut for maintenance in the fall, potentially tightening fuel markets in US regions that partly rely on imports from that facility.
Meanwhile, Russian crude exports have fallen significantly after Ukrainian attacks on Russian refineries prompted Moscow to ban diesel exports. US lawmakers are also seeking to increase pressure, with senators releasing the text of a bill proposing sanctions on buyers of Russian oil.
"Product markets are tighter than crude markets," said Simon Lack, Portfolio Manager at Catalyst Energy Infrastructure Fund. "During the brief ceasefire, energy executives warned that inventories continue to fall, with very little cushion in the entire system."
Concurrently, Iran continues to attack its Gulf neighbors and conduct maritime attacks on ships passing through the Strait of Hormuz, insisting all vessels must obtain its permission before transiting the strait. The heightened tensions are making shipping companies more cautious, and traffic through the strait has fallen significantly over the past 10 days.
While tracked transit through the Strait of Hormuz has decreased, some voyages appear to be continuing, with a few tankers conducting ship-to-ship transfers off the coast of Oman.
Brent crude for September delivery rose 4.6% to settle at $88.10 per barrel.
WTI crude for August delivery rose 4.5% to settle at $82.49 per barrel.
Base Metals
Copper prices fell on Friday, tracking a decline in global equity markets as risk appetite was dampened by growing investor concerns over the valuations of artificial intelligence companies.
The bellwether industrial metal fell as much as 1.6% on the London Metal Exchange. In recent months, copper prices have been highly correlated with the performance of AI-related stocks, as investors bet on a significant increase in copper demand for data centers and related power infrastructure.
The renewed escalation of conflict in the Middle East this week has reignited inflation concerns while also threatening global economic growth and the demand outlook for industrial metals.
At the close, LME copper fell 0.5% to $13,525.5 per metric ton.
LME aluminum fell 1.1% to $3,150.5 per metric ton.
LME nickel fell 1.1% to $16,961 per metric ton.
LME zinc fell 1.9% to $3,525.5 per metric ton.
LME tin rose 0.1% to $53,230 per metric ton.
LME lead rose 0.6% to $1,883 per metric ton.
Precious Metals
Gold pared its weekly losses as investors bought on the dip after prices fell below a key level.
The price of gold rose as much as 1.2%, reclaiming the key psychological level of $4,000 per ounce, after fluctuating between gains and losses earlier in the session.
Despite this, gold is still on track for a weekly decline of over 2%, as the escalation of the Middle East conflict continues to support market expectations for further interest rate hikes by the Federal Reserve.
As of 4:59 PM ET, spot gold was up 1.0% at $4,017.39 per ounce.
Spot silver was up 0.7% at $55.9114 per ounce.
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