Oil prices rose on Wednesday, extending their recent gains and approaching a two week high as disagreements between the United States and Iran continued over reopening the Strait of Hormuz. Fresh attacks by Yemen’s Iran backed Houthis on vessels in the Red Sea also increased concerns about prolonged disruptions to oil supplies across West Asia. Brent crude futures rose 0.6% to $89.45 per barrel by 00:55 ET, while West Texas Intermediate crude futures advanced 0.7% to $83.77 per barrel.
Shipping activity through the Strait of Hormuz remained limited as the United States and Iran made little progress toward reaching an agreement, particularly after Washington said it had attacked a vessel in the Gulf of Oman that it claimed was heading toward Iran. Tehran had indicated earlier in the week that the strait would remain closed unless Washington agreed to its compensation demands, which U.S. President Donald Trump strongly opposed. The Strait of Hormuz remains one of the biggest sources of uncertainty for global oil markets, as roughly 20% of global oil supplies passed through the waterway before the outbreak of the conflict.
Supply concerns intensified as the Houthis continued attacking vessels in the Red Sea and the Bab el Mandeb Strait during the week after the Iran backed group announced a naval blockade against Saudi Arabia. Recent developments have provided little indication that tensions in West Asia are easing, keeping traders alert to the possibility of further disruptions to oil supplies and providing additional support to crude prices.
Data from the U.S. Department of Energy showed that the Strategic Petroleum Reserve fell below 300 million barrels last week. Inventories declined by approximately 6.1 million barrels to 298.7 million barrels. The reserve, which was established by the U.S. government to respond to oil supply emergencies, has been steadily drawn down this year to offset disruptions stemming from the conflict with Iran. President Donald Trump ordered the release of 172 million barrels from the reserve in March in response to the crisis.
In the metals market, gold prices rose on Wednesday and remained close to $4,400 an ounce, supported by continued uncertainty over a U.S. Iran agreement to reopen the Strait of Hormuz and the resulting rise in oil prices. Investors were also awaiting U.S. inflation data that could reshape expectations for Federal Reserve monetary policy. Spot gold, XAU/USD, rose 0.7% to $4,398.92 an ounce, while gold futures advanced 0.4% to $4,458.62. Silver gained 0.6% to $65.07 an ounce, while platinum climbed 0.5% to $1,750.91.
Gold remained supported near a two month high as investors reassessed the chances of an agreement that could allow the Strait of Hormuz to reopen. Pakistan’s defense minister said Washington and Tehran were moving closer to an understanding, while reports of advanced discussions between Oman and Iran suggested that diplomatic efforts were still progressing. Iran, however, insisted that the waterway would remain closed until the United States met its demands, including lifting the blockade on Iranian ports and providing compensation for damage caused by U.S. military strikes.
These conflicting signals kept energy markets highly volatile. The United States and the Iran aligned Houthis reported separate attacks on shipping in the Strait of Hormuz and Bab el Mandeb, while a U.S. Navy helicopter fired missiles at a Panama flagged cargo vessel attempting to cross the Gulf of Oman. For gold, the inflationary impact of higher energy prices remains a key factor. Persistent energy cost increases could encourage the Federal Reserve to keep interest rates elevated for longer, raising the opportunity cost of holding non yielding bullion.
Investors are now waiting for the U.S. Consumer Price Index, followed by Producer Price Index data on Thursday. A softer inflation reading could reduce pressure on the Federal Reserve to tighten monetary policy further, while a stronger than expected figure could revive expectations for another rate increase. Markets have avoided building aggressive positions ahead of the data, while swap pricing indicates that the probability of a 25 basis point rate increase in September is currently around 50%.
At the same time, the People’s Bank of China increased its gold reserves for the twenty first consecutive month in July, adding around 640,000 troy ounces and bringing total holdings to 76.08 million ounces. Chinese gold backed exchange traded funds also continued to attract capital, highlighting persistent institutional demand. Tony Sycamore, senior market analyst at IG, said gold’s recent pullback from $4,435 reflected profit taking ahead of the inflation report, hawkish comments from Federal Reserve officials and renewed strength in energy prices.
Sycamore said gold is now facing downward trend resistance near $4,460, while the 200 day moving average around $4,495 strengthens this resistance zone. He believes bullion needs a sustained move above both levels to create room for a stronger recovery toward $5,000 an ounce.
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