- Brent crude gains 1.45% to $88.33 a barrel, while US oil rises 1.26% to $82.27.
- Threat to extend Iran naval blockade added to potential supply concerns.
- Analysts warn major escalation could trigger sharper rise in oil prices.
Oil prices rose on Friday as markets closely watched tense US-Iran talks, with faltering efforts to end the war raising concerns about potential disruptions to global crude supplies and putting oil and gas prices on track for sizeable weekly gains.
Faltering talks to end the Iran war left oil and gas prices poised for sizeable weekly gains. The US threatened to ramp up economic pressure on Iran, including extending a naval blockade.
US consumer sentiment deteriorated in early August amid the rising cost of living because of the Middle East conflict, a survey showed on Friday.
The US dollar and yields on US Treasuries fell on a surprise drop in US retail sales. The data further reduced expectations of a Federal Reserve rate hike at next month’s meeting.
The weaker dollar supported gold prices.
Tech stocks, which had propelled the S&P 500 to a record high on Thursday, weighed on Wall Street.
The Dow Jones Industrial Average fell 73.41 points, or 0.14%, to 53,766.58, the S&P 500 fell 14.93 points, or 0.19%, to 7,784.06, and the Nasdaq Composite fell 105.11 points, or 0.39%, to 26,697.93.
“There is some profit taking, but I expect that most institutional investors remain fairly optimistic,” said Peter Andersen, founder of Andersen Capital Management.
Both the S&P 500 and the Nasdaq were still on track for their third consecutive weekly gain.
European shares finished lower on Friday and snapped a four-week winning streak, as rising crude prices and renewed geopolitical tensions offset support from a resilient earnings season.
MSCI’s gauge of stocks across the globe fell 1.08 points, or 0.09%, to 1,159.72.
MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.29% higher at 1,640.08.
Geopolitical risks
“The markets round out the week on a positive note, with relatively thin event risk on the economic and corporate calendar. But of course, it’s a Friday, and the typical pattern has been for geopolitical risks, or at least bombastic rhetoric, to pick up between the US and Iran going into the weekend,” Capital.com strategist Kyle Rodda said.
“Currently, the geopolitical uncertainty remains the only major macro roadblock to a market experiencing strong tailwinds from earnings and the monetary policy outlook.”
Brent crude futures rose to $88.33 per barrel, up 1.45% on the day, and US oil prices rose 1.26% to $82.27.
John Sidawi, senior portfolio manager for fixed income at Federated Hermes, said a puzzling feature of markets in recent months has been the growing disconnect between geopolitical uncertainty and asset price volatility.
“For now, markets appear willing to tolerate a significant amount of uncertainty without demanding higher risk premiums. However, this equilibrium is unlikely to be permanent,” Sidawi said.
“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.”
Yen stuck in intervention loop
In currency markets, the yen strengthened 0.08% against the greenback to 159.37 per dollar, after a Reuters report that the Bank of Japan could raise rates as soon as September, citing three sources familiar with policymakers’ thinking.
However, it is still within sight of the 160 level that traders think could trigger another bout of yen buying from Tokyo, after joint intervention with the US last month failed to support the Japanese currency.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.25% to 99.67, with the euro up 0.32% at $1.1564.
In commodities, spot gold rose 0.69% to $4,380.03 an ounce. US gold futures settled 0.4% higher at $4,437.30.
