Oil prices climbed more than $1 a barrel on Friday as faltering U.S.-Iran talks pointed to sizeable weekly gains for crude and gas. A surprise drop in U.S. retail sales further dented expectations for a Federal Reserve rate hike next month, pressuring the dollar and lifting gold.
Crude gains on Iran tension
U.S. crude futures finished at $82.40 a barrel, up 1.42%, while Brent crude settled at $88.52, up 1.67%. Talks to end the Iran war are faltering, leaving oil and gas prices poised for sizeable weekly gains. The U.S. threatened to ramp up economic pressure on Iran, including extending a naval blockade.
Capital.com strategist Kyle Rodda said geopolitical uncertainty remains the main macro risk to markets otherwise buoyed by earnings and the monetary policy outlook. But John Sidawi, senior portfolio manager for fixed income at Federated Hermes, pointed to a growing disconnect between that uncertainty and asset price volatility. He said markets currently appear willing to tolerate a significant amount of uncertainty without demanding higher risk premiums, though a sharp escalation or resolution in the conflict could still force a larger volatility response than current pricing implies.
Retail sales surprise cools rate-hike bets
The U.S. dollar fell after a surprise drop in U.S. retail sales, a reading that further reduced expectations of a Federal Reserve rate hike at next month's meeting. U.S. consumer sentiment also deteriorated in early August amid the rising cost of living tied to the Middle East conflict.
Treasuries fell on Friday after an initial rally driven by the retail sales data lost momentum, and the yield on benchmark U.S. 10-year notes rose 4.72 basis points to 4.688%. The dollar index fell 0.28% to 99.65, with the euro up 0.35% at $1.1567.
Gold and yen catch the safe-haven bid
Spot gold rose 0.53% to $4,374.27 an ounce, while U.S. gold futures settled 0.4% higher at $4,437.30, as the softer dollar supported demand.
The yen strengthened 0.1% against the greenback to 159.33 after a Reuters report that the Bank of Japan could raise rates as soon as September, according to three sources familiar with policymakers' thinking. The currency remains within sight of the 160 level that traders think could trigger another round of yen buying from Tokyo, after joint intervention with the U.S. last month failed to support it.
Source: Investing.com
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