Oil Rises on Middle East Tensions, Gold Heads for Weekly Loss When Peace and Inflation Pull Markets in Opposite Directions
Commodity markets traded mixed on July 17. Brent crude rose 1.25% to $85.28 as US-Iran truce broke down disrupting Strait of Hormuz oil flows again. Gold fell 3.5% for the week its steepest weekly decline since early June as softer US inflation data reduced Fed rate hike fears. Two commodities, two completely opposite drivers.
After falling below $70 on peace hopes crude is climbing back the US-Iran truce collapsed with both sides intensifying attacks across the Gulf. Tehran also asked Houthis to prepare to shut the Red Sea export route adding another supply disruption threat. Every escalation in the Middle East pushes crude higher by threatening the two most critical global oil shipping routes simultaneously Strait of Hormuz and Red Sea.
This seems contradictory normally geopolitical tensions push gold higher as a safe haven. But a more powerful force dominated this week softer US inflation data. Lower inflation means the Fed is less likely to raise interest rates aggressively. Lower rate hike expectations reduce the opportunity cost of holding gold but paradoxically this week investors sold gold to buy risk assets like equities instead as rate fears eased. The dollar weakened on the same data typically supporting gold but equity markets attracted more capital this time.
July 17's commodity session taught me that geopolitical tension and inflation expectations can pull commodities in opposite directions simultaneously crude rising on supply fears while gold falls on rate cut hopes making it essential to track both Middle East developments and US Fed signals together for energy stocks like