Oil Prices Soar to Multi-Month Highs Amid Middle East Tensions

Oil prices have surged to multi-month highs, driven by concerns over supply disruptions in the Middle East. The recent attacks on Saudi Arabia and increased hostilities in the region have led to a significant increase in oil prices, with WTI trading at $103 and Brent at $107.

The US diesel price has also crossed the $6 per gallon mark for the first time last week, highlighting the impact of rising oil costs on the economy. Commerce Bank raised its year-end diesel forecast to $1,200 a tonne from $950, citing elevated oil prices as a key factor.

Gold, on the other hand, has fallen due to increased expectations of a rate hike by the Federal Reserve. The market now sees an 86.5% chance of a 25-basis-point rate hike this week, up from 65% previously. This has led to higher bond yields and a stronger US dollar, weighing on gold prices.

The impact of geopolitics on gold is mixed, with safe-haven flows potentially supporting the metal but rising inflation expectations putting upward pressure on yields.