Oil Prices Climb as Stalled US-Iran Talks Fuel Geopolitical Tensions
Oil prices rose on Friday as US-Iran negotiations stalled, heightening concerns about disruptions to global crude supplies. The United States threatened to step up economic pressure on Iran, including by extending a naval blockade, as talks showed little progress towards a deal to end the conflict.
The heightened geopolitical tensions supported oil prices despite a decline in US and European shares after economic data further weakened expectations of a Federal Reserve rate hike next month. The US dollar and yields on US Treasuries fell on a surprise drop in US retail sales, which reduced expectations of a rate hike at next month's meeting.
US consumer sentiment deteriorated in early August amid the rising cost of living due to the Middle East conflict, a survey showed on Friday. Brent crude futures rose 1.45% to $88.33 per barrel, and US oil prices rose 1.26% to $82.27.
A meaningful escalation in conflict or a clear path toward resolution could finally force investors off the sidelines, potentially triggering a much larger volatility response than current market pricing implies, said John Sidawi, senior portfolio manager for fixed income at Federated Hermes.