Oil prices rebounded after two consecutive sessions of losses as renewed military tensions in the Middle East raised concerns over the security of oil facilities and crude export routes. December Brent crude futures gained 1.5% to $115 per barrel, while West Texas Intermediate crude rose by the same percentage to $101 per barrel. The recovery followed a rally that pushed Brent above $117 last week, marking its highest level in six months, before prices retreated on growing expectations of a possible diplomatic breakthrough.
Fresh pressure emerged in energy markets after the Houthis announced a ballistic missile attack targeting Saudi Arabia’s Ras Tanura oil refinery, following earlier strikes on pumping stations along the East West oil pipeline and King Khalid International Airport in Riyadh. These developments have become particularly significant amid disruptions to shipping through the Strait of Hormuz, as the Saudi pipeline serves as one of the main alternatives for exporting crude without passing through the strait. Attacks on this infrastructure have increased concerns about producers’ ability to maintain oil supplies if the conflict escalates further, prompting traders to factor a higher geopolitical risk premium into crude prices.
On the political front, talks involving officials from Saudi Arabia, Turkey, Pakistan, and Iran have failed to fully ease market concerns, particularly as attacks continue and reports suggest the possibility of further US military action against Iran following the November midterm elections. ING analysts believe the recent oil rally reflects the growing probability of renewed conflict being priced into the market, with investors closely monitoring political and military developments. Oil prices are likely to remain highly sensitive to news surrounding diplomatic negotiations, energy infrastructure security, and maritime shipping routes. Any further escalation could push prices toward their recent highs, while meaningful progress in diplomatic efforts could reduce the geopolitical risk premium.
US inventory figures provided additional support for crude prices after estimates from the American Petroleum Institute showed a decline of 2.03 million barrels in crude inventories for the week ending October 23, compared with market expectations for an increase of approximately 800,000 barrels. This followed a larger draw of 4.93 million barrels in the previous week, indicating two consecutive weeks of declining crude stockpiles. However, gasoline inventories increased by 2.39 million barrels, while distillate stocks rose by approximately 380,000 barrels, presenting a less clear picture of demand for refined petroleum products. This makes the upcoming official data from the US Energy Information Administration particularly important for assessing the balance between supply and consumption.
These developments coincide with anticipation surrounding the Federal Reserve’s interest rate decision, as investors assess the implications of persistently high energy costs for inflation and economic growth. Sustained elevated oil prices could increase production and transportation expenses, potentially limiting the Federal Reserve’s ability to ease monetary policy. In the near term, geopolitical risks and US inventory trends are expected to remain the main drivers of price movements. Brent crude’s $117 level remains an important area to monitor after recently limiting further gains, although its classification as a confirmed technical resistance level would require additional chart analysis.
Meanwhile, gold prices declined as the US dollar strengthened and investors remained cautious ahead of the Federal Reserve’s interest rate decision. Spot gold fell to $4,037 per ounce, while US gold futures dropped to $4,051, alongside an increase in the US Dollar Index to 102.42 points. These losses followed a 1.1% gain in the previous session, as gold attempted to stabilize after a period of significant volatility across financial markets.
Gold’s recent performance has been influenced by changing investor risk appetite, particularly amid sharp movements in technology stocks and companies linked to artificial intelligence. Equity market losses prompted some investors to reduce their gold holdings to raise liquidity and cover losses elsewhere in their portfolios, contributing to the metal’s decline to its lowest level since mid July during Friday’s trading session. As global equities recovered and investor interest in the technology sector improved, gold continued to face selling pressure as some capital shifted toward riskier assets.
On the other hand, gold’s recent decline below $4,000 per ounce encouraged physical buying, particularly among investors seeking opportunities at lower prices. Chinese demand also strengthened over the past two months, supported by softer gold prices and declining interest in domestic equities. This buying activity provided support for the market and helped limit further selling pressure. According to ANZ estimates, purchases by Chinese households have helped stabilize gold prices during periods of volatility despite continued pressure from currency movements and broader financial market developments.
US monetary policy remains a key factor in determining gold’s direction over the coming period. A more restrictive stance from the Federal Reserve could strengthen the dollar and increase pressure on the precious metal, while signals of monetary easing could create opportunities for a price recovery. The $4,000 level carries considerable psychological importance, particularly after gold recently slipped below it before recovering. Sustained trading above this area could help limit selling pressure, while another break below it may expose prices to further declines, especially if the dollar continues to strengthen or Federal Reserve officials deliver more restrictive guidance than investors currently expect.
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