US-Iran Tensions Fuel Oil Price Surge Ahead of Crucial Inflation Data

Oil prices surged to their highest levels in recent days due to ongoing tensions between the US and Iran, which have kept the Strait of Hormuz effectively shut. The continued uncertainty has led traders to bet on a possible interest rate hike by the Federal Reserve before the end of the year, with some even predicting at least two increases.

The Fed's July meeting saw three board members call for an increase in interest rates, dissenting from the final decision to hold rates steady. Analysts point out that there will be one more consumer price index (CPI) release and another jobs report before the Fed's next meeting in September.

Forex.com's Fawad Razaqzada noted that crude oil prices have surged due to a lack of progress in talks between the US and Iran, with any potential deal still far off. He said the positions of both countries indicate 'any potential deal is still some way off, meaning risks remain skewed to the upside for oil prices'.