Sawt Falasteen - Oil gains on fresh attacks, dollar slides as inflation slows

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Oil gains on fresh attacks, dollar slides as inflation slows
Oil gains on fresh attacks, dollar slides as inflation slows / Photo: Michael HEIMAN - GETTY IMAGES NORTH AMERICA/AFP/File

Oil gains on fresh attacks, dollar slides as inflation slows

Oil prices surged on Tuesday after fresh US strikes against Iran, fuelling fears for the future of Middle East peace efforts and raising the risk of another spike in inflation.

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Meanwhile the latest data showed US consumer inflation dipped in June thanks to a drop in energy prices, which sent the dollar lower as traders saw less likelihood that the US Federal Reserve will hike interest rates later this month.

The second quarter earnings season got underway with JPMorgan Chase reporting a surge in net profit to $21.2 billion, which Yahoo Finance said was the largest quarterly profit in US banking history.

While the inflation and earnings news were positive for stocks, the Dow shed 0.3 percent at the opening bell, pulled down by a 23 percent plunge in IBM shares.

The company issued an earnings warning, with CEO Arvind Krishna saying the second quarter was "worse than our expectations".

IBM released at the start of the quarter a new mainframe processor for AI applications that was well-received by clients, but Krishna said that in June companies shifted spending towards servers and storage in anticipation of supply constraints and price hikes, leading the company to fall short of its targets.

While IBM suffered from the shift in spending, it was positive for the sector as a whole, with the PHLX semiconductor index rising more than three percent.

Fed Chairman Kevin Warsh told lawmakers Tuesday that the central bank will rid the United States of a years-long "inflation surge", heightening anticipation over the latest US consumer price index (CPI) data.

The Labor Department later said that CPI rose by 3.5 percent on a year-on-year basis in June, down from a 4.2 percent increase in May.

The month-on-month drop was 0.4 percentage points, which Briefing.com analyst Patrick O'Hare noted was the largest monthly drop since April 2020.

"Inflation has not been slayed, but this report should be enough to keep the (the Federal Reserve's monetary policy committee) on hold at its July 28-29 meeting," he said.

Earlier Tuesday, the market saw a roughly 40 percent probability of a US interest rate hike this month, but that fell to 13 percent after the CPI data was published.

The market still sees the Fed as likely hiking rates at its following meeting in September.

The dollar slid against rival currencies after the inflation data was published.

Oil prices were up more than three percent as equity markets in New York opened.

International benchmark Brent North Sea crude rose as much as five percent to trade around $87 a barrel.

Prices had already shot up more than nine percent on Monday.

The latest attacks came after Iranian forces struck a commercial ship in the Strait of Hormuz early on Sunday, before announcing the closure of the waterway through which about a fifth of global oil passes.

That led to a series of US strikes on sites in the Islamic republic, prompting Tehran to respond by hitting targets in Bahrain, Jordan, Kuwait and Oman.

US President Donald Trump vowed to reimpose a naval blockade on Iranian ports, though he said a deal with Iran was still possible.

"The prospect of more fighting and a fresh blockade has meant that traffic through the Strait has slowed to a near halt," said Kathleen Brooks, research director at trading group XTB.

"When the supply chain gets gummed up, this is what keeps upward pressure on the oil price," she added.

Rising oil prices hit European equities, although London edged higher thanks to gains in energy stocks.

Asian stocks mostly climbed after tech firms enjoyed some reprieve from the latest bout of selling.

- Key figures around 1330 GMT -

Brent North Sea Crude: UP 3.8 percent at $86.48 a barrel

West Texas Intermediate: UP 3.1 percent at $80.57 a barrel

New York - Dow: DOWN 0.3 percent at 52,342.41

New York - S&P 500: UP 0.1 percent at 7,525.67

New York - Nasdaq Composite: UP 0.5 percent at 26,011.80

London - FTSE 100: UP 0.2 percent at 10,516.00 points

Paris - CAC 40: DOWN 0.2 percent at 8,345.79

Frankfurt - DAX: DOWN 0.3 percent at 25,037.36

Tokyo - Nikkei 225: UP 0.7 percent at 67,743.50 (close)

Seoul - Kospi: UP 0.7 percent at 6,856.83 (close)

Hong Kong - Hang Seng Index: UP 0.5 percent at 24,340.73 (close)

Shanghai - Composite: UP 1.4 percent at 3,967.13 (close)

Euro/dollar: UP at $1.1453 from $1.1384 on Monday

Pound/dollar: UP at $1.3404 from $1.3353

Dollar/yen: DOWN at 161.88 yen from 162.43 yen

Euro/pound: UP at 85.45 pence from 85.25 pence

T.Ibrahim--SF-PST