Oil and gold moved higher on Wednesday as fresh attacks on shipping and renewed military tensions in Asia pushed investors toward traditional safe-haven assets, while markets awaited the latest US inflation figures for clues on the Federal Reserve’s next move.
US crude futures climbed 0.89% to $83.94 a barrel, while Brent crude added 0.78% to $89.60. Both benchmarks had already gained more than $1 in the previous session, reaching their strongest closing levels since July 31.
Spot gold rose 0.46% to $4,387.03 an ounce.
The cautious mood followed reports of attacks involving shipping in waters around the Middle East. The US and Iran-aligned Houthi forces in Yemen reported separate incidents, adding to concerns over the security of a vital global trade route.
Four crew members aboard an Egyptian-owned vessel were killed in a Houthi attack on Tuesday, according to Yemen’s transport ministry. The US military separately said it had targeted a container ship attempting to head toward an Iranian port. If confirmed, the deaths would represent the first fatalities from a Houthi shipping attack since the Iran conflict began on February 28.
Tensions were not limited to the Middle East. North Korea launched a ballistic missile toward waters off the Korean Peninsula’s east coast, just days before major joint military exercises involving South Korea and the United States. Taiwan also objected to planned naval exercises involving China and an Indonesian warship near its eastern waters.
With geopolitical risks building, investors turned their attention to the US consumer price index, due later Wednesday. The figures could influence expectations for the Federal Reserve’s next policy meeting, with financial markets currently assigning roughly even odds to a rate hike next month.
Economists expect US consumer prices to rise 0.1% in July after a 0.4% decline in June. Annual inflation is forecast to ease slightly to 3.4% from 3.5%.
The latest CPI figures will not fully reflect the newest surge in energy prices, but a surprisingly soft reading could revive demand for US government bonds by reducing expectations of further monetary tightening.
“Everyone’s got their eyes on the CPI report,” National Australia Bank’s head of markets research Skye Masters said. A zero reading, he suggested, could trigger a strong rally in Treasuries as traders scale back bets on tighter Federal Reserve policy.
Currency markets were comparatively subdued. The dollar index edged up 0.04% to 99.85, while the euro slipped 0.02% to $1.1538. Sterling was down 0.01% at $1.3501.
The yen was little changed, weakening 0.03% to 159.31 per dollar. The currency remains well below last week’s level near 155.20 following several suspected interventions by Japanese and US authorities.
Japanese bond markets, meanwhile, reflected growing expectations of an earlier Bank of Japan rate increase. The five-year government bond yield climbed to a record 2.1%, while the two-year yield reached 1.63%, its highest level in 31 years.
Asian equities were slightly firmer, with MSCI’s broadest Asia-Pacific index excluding Japan gaining 0.5%. Japan’s Nikkei was largely unchanged after trading resumed following a holiday.
European markets looked less confident ahead of the US data. Euro Stoxx 50 futures fell 0.15%, German DAX futures declined 0.12%, and FTSE futures slipped 0.25%. S&P 500 futures were marginally higher.
For investors, the immediate question is whether inflation can offer any relief from the growing pressure created by energy prices and geopolitical uncertainty.
