Oil Surges Amid Middle East Tensions, Gold Falls on Rate Hike Expectations
Oil prices surged on Monday, reaching multi-month highs after a series of attacks in the Middle East over the weekend. The price of WTI rose to $103, while Brent climbed to $107, up from their previous levels.
The recent attacks on Saudi Arabia's east-west pipeline have heightened supply concerns and kept the risk premium on oil high. The disruption has also affected shipping through the Strait of Hormuz, with extremely low levels of vessels transiting.
Elevated oil prices are having a direct impact on the real-world economy, with US diesel prices reaching $6 per gallon for the first time last week. Commerce Bank raised its year-end diesel forecast to $1,200 per tonne from $950.
Gold prices, however, fell as expectations of a Federal Reserve rate hike increased following stronger-than-expected US inflation data on Friday. The market now sees an 86.5% chance of a 25-basis-point rate hike this week, up from 65% previously.