Brent Crude Soars to $88 Amid Iran-US Tensions
Crude oil prices are on the rise again, with Brent crude climbing to $88 a barrel on Tuesday, its highest since July 31. This increase is largely due to tensions flaring between the US and Iran over the Strait of Hormuz, a crucial oil transit chokepoint.
The Strait of Hormuz accounts for roughly 20 million barrels a day, or about 20% of global petroleum liquids consumption. The negotiations between the two countries have stalled, with President Donald Trump adding compensation demands to an already difficult negotiation.
IG market analyst Tony Sycamore sees the situation as a prolonged test of which side is prepared to concede first, saying that crude prices could remain volatile while the political impasse persists.
The oil rebound raises the stakes for Wednesday's US inflation report, scheduled for 8:30 am ET. Economists expect headline CPI to rise 0.1% from June and core prices to increase 0.2%. A sustained crude rally would not feed through to consumer prices immediately, but it could lift inflation expectations.
Capital Economics economist Jonas Goltermann sees the risk around CPI tilted towards a stronger reading, which could revive rate-hike expectations and concerns about weak growth arriving alongside persistent inflation.