Oil Soars Above 4% On US-Iran Conflict Escalation, Other Assets Mixed

Oil prices climbed over 4% on Monday as the US-Iran conflict escalated over the weekend, raising concerns about the safety of vessels in the Strait of Hormuz and global oil supplies. Oil prices WTI crude rose by 4.68% to $74.75 per barrel, while Brent crude rose by 4.62% to $79.52 per barrel as of 9:49 am AST Arabia on Monday.Oil prices surged as Iran and the US exchanged attacks over the weekend in the Gulf, raising concerns over oil supply movement in the region. Last week, the US canceled Iran’s waiver to sell crude and launched military strikes on Iran in response to reported Iranian attacks on three tankers in the Gulf region. Despite the latest oil price surge, analysts say traders remain hesitant about jumping into the oil market. “The uncertainty over the recent flare-up in tensions—whether it will be short-lived or more sustained—seems to be keeping a large share of market participants on the sidelines,” said ING’s Head of Commodities Strategy, Warren Patterson, and commodities strategist, Ewa Manthey, in a note Monday.Hormuz disruptionThe maritime security threat level in the Strait of Hormuz remains in the ‘severe’ category as of Sunday, July 12, according to the Joint Maritime Information Center (JMIC).Despite Iran declaring the Strait closed as of Sunday, JMIC and the US Naval Forces Central Command (USNAVCENT) said the southern route remains open and has been expanded to accommodate two-way traffic. However, just six vessels transited the Strait on Sunday, including one tanker controlled by the Abu Dhabi National Oil Company (ADNOC), marking the lowest traffic level in five weeks, according to Kpler data cited by Reuters on Monday. “Escalation has slowed vessels transiting the strait to a trickle, renewing concerns over oil supply tightness through the third quarter,” said the ING strategists. Gulf markets The Dubai Financial Market General Index (DFMGI) fell by 1.28% to 5,964.88, while Abu Dhabi Securities Exchange (ADX)'s FADGI fell by 0.371% to 9,899.26 on Monday, as of 11:57 am AST. Meanwhile other Gulf markets traded slightly higher on Monday despite geopolitical events over the weekend. Saudi Arabia’s TASI rose 0.02% to 10,821.09, and Boursa Kuwait’s Main Market gained 0.03% to 8,887.96, on Monday, at around 11:53 am AST. Qatar’s QE Index closed up by 0.13% to 10,103.22 on Sunday. Reflecting on the subdued regional performance, Kuwait-based advisory firm Edge for Economic Consultancy noted in its Sunday market analysis that "single-session moves of a fraction of one percent across every open exchange point to markets that have already spent a month repricing this conflict.”Gold, dollar indexSpot gold edged down by 0.71% to $4,058.49 per ounce on Monday as of 10:30 am AST Arabia, continuing a decline of over 5% in the last 30 days. The dollar index, which measures the greenback against a basket of six major currencies, holds steady at 101.11, up 0.16%, as of 10:30 am AST on Monday. Escalating geopolitical tensions and growing expectations of continued US monetary tightening contributed to gold prices’ decline this month. This week’s main catalysts include June inflation data on Tuesday and a public testimony from Fed Chair Kevin Warsh, with markets watching for any shift in the outlook for rates and gold’s hold above $4,000, said Mathew Bolden, markets trader at Goldprice.org, in a report Friday. The CME Group’s FedWatch tool showed that markets are pricing in a 71% probability of the Federal Reserve raising interest rates at the September meeting.What to watch forThe US Bureau of Labor Statistics will release the June Consumer Price Index (CPI) report on July 14.