Crude oil prices posted their biggest gain in three weeks as geopolitical tensions in the Middle East escalated sharply, while gold slipped as renewed US-Iran hostilities revived concerns that inflationary pressures could push the Federal Reserve toward further interest rate hikes.
Oil prices recorded their most substantial weekly advance in three weeks, driven by a sudden intensification of Middle East turmoil. The US and Iran exchanged direct military strikes for the first time in about a month, with no immediate signs of de-escalation. West Texas Intermediate (WTI) crude climbed 2.8 percent to settle near $86 per barrel. In the latest round of hostilities, US forces targeted an island in the Strait of Hormuz, prompting retaliatory Iranian attacks on the United Arab Emirates and Jordan. The renewed conflict has stoked fears that a prolonged military campaign could further disrupt shipping through the crucial Strait of Hormuz.
Crude futures are wrapping up another period of extreme volatility, with WTI's monthly trading range approaching $15 per barrel. As part of its economic pressure campaign, Washington has maintained a naval blockade on Iranian ports to restrict the country's crude exports. However, according to traders monitoring cargo flows, between six million and eight million barrels of oil — primarily sourced from other Gulf producers — are still moving through the Strait of Hormuz daily. This volume of traffic has helped temper further price gains despite the uncertain war outlook.
Multiple current and former US and Iranian officials have indicated they expect the conflict to persist for months, with neither side possessing the capacity to break the stalemate. Ole Hansen, head of commodity strategy at Saxo Bank, said: "The key is crude volumes. As long as oil can keep flowing through the Strait of Hormuz, buying will remain restrained because traders are wary of chasing the market higher."
WTI for October delivery rose 2.8 percent to settle at $85.76 per barrel. Brent for November settlement gained 2.7 percent to close at $90.49 per barrel.
Gold prices edged lower as renewed geopolitical risk in the Middle East magnified concerns over inflation, reinforcing expectations of a more hawkish Fed stance, which pressured the precious metal. Despite the decline, gold remains on track for a gain of roughly 10 percent in August, which would mark its best monthly performance since January. The rally was sparked in mid-August when the US Treasury unexpectedly announced an expansion of its bond buyback program, propelling bullion prices sharply higher.
Nicky Shiels, head of research and metals strategy at MKS PAMP, noted in a report that a "tug-of-war" is unfolding between a dovish-leaning Treasury Department and a more hawkish Federal Reserve. As of 5:00 pm Eastern Time, spot gold was down 0.4 percent at $4,437.38 per ounce. Spot silver advanced 0.3 percent to $66.5751 per ounce.
In base metals, the London Metal Exchange (LME) was closed for the UK summer bank holiday.
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