Brent crude slipped on Friday but remained on track for a substantial weekly gain, as the specter of war in Iran and threats by Houthi rebels against Saudi Arabia kept traders on edge. Meanwhile, copper found its footing thanks to bargain hunting and fresh buying, while gold advanced alongside equities and Treasuries despite hotter-than-expected U.S. inflation data that fueled bets on a Federal Reserve rate hike next week.
Oil: Brent Eases From Four-Month Peak, Yet Geopolitical Risks Loom Large
Oil prices retreated on Friday but still posted the largest weekly advance since July, as the Middle East conflict shows little sign of abating. The global benchmark fell 2.8% on the day, yet the week’s gain remained robust. Escalating hostilities in the region over the past fortnight have tightened global supply, particularly after recent increases in crude purchases. The violence prompted Saudi Arabia to shut a key east-west pipeline as a precaution, raising concerns about the fragility of alternative transport routes that have become vital lifelines for oil shipments, given that vessels cannot pass through the Strait of Hormuz. Earlier this week, Iran-backed Houthi forces advanced toward coastal areas adjacent to the strategic Bab el-Mandeb strait.
"Most traders believe the damage to the east-west pipeline is manageable and likely to be repaired quickly," said Dennis Kissler, senior vice president of trading at BOK Financial Securities Inc. However, he added that the incident casts doubt on the reliability of the alternative routes around Hormuz that have kept oil flowing over recent months. The International Energy Agency warned on Friday that disruptions to global oil supply are forcing consumption to decline. The agency noted that global oil demand is expected to shrink this year by the most since the pandemic, driven by higher fuel costs and reduced supply.
While some oil exports continue to transit the Strait of Hormuz, tankers often sail with transponders switched off to avoid detection, yet vessels still face ongoing attack risks. The UK Maritime Trade Operations office reported on Thursday that two ships were struck by unidentified projectiles west of Sohar in the Sea of Oman, underscoring the persistent dangers to shipping. Iran has said it plans to meet with Persian Gulf states on Monday to discuss regional issues and the outcome of its negotiations with Oman on safe shipping lanes through the strait.
"As before, caution is warranted regarding any news of a potential deal. At this stage, it is unlikely Iran will abandon its earlier demands, such as seeking control over the strait," said Ryan McKay, senior commodity strategist at TD Securities. Brent for November settlement fell 2.8% to settle at $104.61 a barrel, though the contract gained 8.7% for the week. WTI for October delivery slipped 2.4% to close at $100.05 a barrel.
Copper Firms as Funds Step In With Bargain Hunting and Purchases
Copper prices steadied on Friday, supported by bargain buying after an earlier selloff triggered by speculation that the U.S. might delay a decision on import tariffs for the metal. Brokers and banks closely monitoring trade flows noted that renewed buying from funds and manufacturers helped stabilize prices. Three-month copper on the London Metal Exchange (LME) was near $14,200 a tonne, following a 3.6% drop on Thursday on reports that inflation concerns had made the White House hesitant over its tariff plans.
"After the initial sharp decline yesterday, we have seen both fresh buying from commodity speculative funds and other speculative money stepping in to buy copper on the LME," said Michael Cuoco, head of metals and commodity fund sales at StoneX Financial Inc. LME copper was little changed at $14,240 a tonne. Aluminum dipped 1.2% to $3,253 a tonne, nickel fell 1.2% to $16,469 a tonne, zinc eased 0.3% to $3,881 a tonne, tin declined 1.8% to $53,364 a tonne, and lead slipped 0.5% to $1,892 a tonne.
Gold Rises as Dollar and Yields Whipsaw Following Inflation Print
Gold advanced alongside U.S. equities and Treasuries, even as higher-than-expected inflation data led traders to significantly increase bets on a Federal Reserve rate hike next week. Bullion briefly climbed nearly 2%, approaching $4,400 an ounce. In the minutes after the U.S. consumer price index release on Friday, gold initially dipped but quickly reversed course. Typically, rate hikes are bearish for gold, which yields no interest. The Bloomberg Dollar Index and two-year Treasury yields also swung sharply as traders swiftly reassessed the data’s implications.
With inflation still elevated, swaps markets now price in roughly a 90% probability of a Fed rate hike at its September 15-16 meeting, up from about two-thirds earlier on Friday. Gold has been under pressure this week as rising oil prices reignited inflation concerns, keeping rate-hike bets alive. Some traders had built bearish positions before the data release, expecting the start of a monetary tightening cycle. However, after the print, they judged that the upside surprise might prompt a one-off hike rather than a sustained tightening cycle, prompting them to cover short positions.
"This is a classic 'sell the rumor, buy the fact' move," said Ole Hansen, head of commodity strategy at Saxo Bank. "Gold has been under pressure all week as oil prices rose. Although the CPI offered no relief, lower oil prices and a pullback in bond yields helped provide support, fueling a rebound driven by short covering." As of 4:59 p.m. in New York, spot gold was up 0.7% at $4,349.08 an ounce. Silver rose 1.4% to $64.4889 an ounce.