Oil, gold climb on shipping attacks and tensions ahead of CPI

Oil and gold prices climbed on Wednesday as escalating geopolitical risks — including attacks on shipping in the Red Sea, a North Korean missile launch, and stalled negotiations over the Strait of Hormuz — drove investors toward safe-haven and energy assets ahead of a key U.S. inflation report.

Energy and Precious Metals Rally

Brent crude advanced 0.78% to $89.60 per barrel while U.S. crude rose 0.89% to $83.94, according to Reuters, extending a rally that saw both benchmarks jump about 5% on Monday and settle at their highest levels since July 31 on Tuesday. Spot gold gained 0.9% to $4,406.34 per ounce, rebounding toward a 10-week high after posting its largest weekly gain since January on Friday.kfgo+2

"The primary driver for gold is the reduction in pricing of rate hikes by the Fed," said Kelvin Wong, a senior market analyst at OANDA. Traders now assign a 50% probability to a rate increase in September, down from 60% before last week's weaker-than-expected jobs report, according to the CME FedWatch Tool.cnbc+1

Geopolitical Flashpoints Multiply

Four crew members of an Egyptian-owned ship were killed in an attack by Yemen's Iran-aligned Houthis on Tuesday — the first fatalities from a Houthi strike on shipping since the Iran war began on February 28, according to Yemen's transport ministry. The U.S. military said separately that it struck a container ship attempting to sail toward an Iranian port.wtvbam+1

"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," Kyle Rodda, senior financial market analyst at Capital.com, wrote in a note. A North Korean ballistic missile launch and planned Chinese-Indonesian naval drills near Taiwan added to the unsettled backdrop.kfgo+1

CPI Data in Focus

Wednesday's Consumer Price Index release is expected to show prices edged up 0.1% in July after falling 0.4% in June, with annual inflation forecast to slow to 3.4% from 3.5%, according to a Reuters poll. The data will not capture the most recent surge in energy costs but could still shape expectations for the Federal Reserve's September meeting.wtvbam+1

On Wall Street Tuesday, the S&P 500 fell 0.32% to 7,728.20, the Dow Jones Industrial Average dropped 0.34%, and the Nasdaq Composite declined 0.06%, as rising oil weighed on sentiment.wsj