Oil jumped after the US struck Iranian rocket launchers on Larak Island, with Brent breaking above $90 a barrel and WTI pushing above $86. Iran claimed retaliatory strikes on US bases in Jordan, though six to eight million barrels a day reportedly still transit the Strait of Hormuz.
Oil rallied after the US struck Iranian rocket launchers on Larak Island that were reportedly being prepped to mine the Strait of Hormuz. Brent crude broke above $90 a barrel and WTI pushed above $86, the first such exchange in roughly a month.
Iran claims retaliation, but flows keep moving
Iran claimed retaliatory strikes on US bases in Jordan and separately alleged that a supertanker had struck two mines while attempting to cross Hormuz's southern route, an incident that has not been independently confirmed. Despite the escalation, reports suggest between six and eight million barrels a day are still transiting the strait, mainly from other Gulf producers, meaning the physical disruption to supply remains limited relative to the headline risk.
Oil is now up around 2% for August, on top of a 22% surge in July.
A hawkish Fed complicates the picture
The oil spike landed alongside a shift in Fed policy expectations. Fed Chair Kevin Warsh reinforced his hawkish Jackson Hole tone with confident remarks at the G20 on Monday, saying that secular stagnation now looks like a description of the past. Markets responded by pushing September rate hike odds, as tracked by CME's FedWatch tool, up to around 57%, sharply higher than the roughly 40% priced a week earlier, while the 10-year Treasury yield climbed to around 4.7% on a third consecutive day of gains.
That shift sits in some tension with the case Treasury Secretary Scott Bessent laid out in a CNBC interview the same day, in which he argued the Fed traditionally avoids raising rates into a supply shock absent second or third order inflation effects.
Dollar and equities respond
The stronger hike odds lifted the US dollar, with USD/JPY briefly trading above 160. US equities slipped Monday, with the S&P 500, Nasdaq and Dow all down by roughly 0.1% to 0.7%, partly dragged by weakness in Goldman Sachs and Alphabet.
Even so, all three indices closed out August with monthly gains intact, extending the Dow's winning streak to five straight months. Gold, which had fallen sharply on Friday in response to Warsh's hawkish tone and the resulting dollar strength, steadied on Monday as the oil-driven risk premium offset some of the rate-driven pressure, though silver underperformed gold on the same move.
Source: Investinglive
Trading involves risk.
Risk Disclaimer
