Brent crude oil rose sharply on Tuesday as renewed fighting between the United States and Iran increased concerns about further disruptions to energy shipments through the Strait of Hormuz.
Brent futures climbed 1.88% to $92.19 per barrel in early U.S. trading, extending Monday’s gains. Oil prices have rallied after the U.S. and Iran exchanged direct attacks for the first time in about a month, reviving fears of a broader escalation in the Middle East.
The Strait of Hormuz remains the central concern for oil markets. Roughly one-fifth of global oil supplies normally pass through the waterway, but traffic remains severely constrained. Visible commodity-vessel traffic was recently running well below its 10-day average, while diplomatic efforts led by Qatar and Oman to improve access through the strait have yet to produce a breakthrough. (The Business Times)
Supply fears intensified after a tanker reported being struck by three projectiles while leaving the Strait of Hormuz. No casualties or environmental damage were reported, but the incident highlighted the continuing risk to commercial shipping. (Reuters)
Higher oil prices are also feeding into broader financial markets. The renewed energy shock is increasing inflation concerns and contributing to the global bond selloff, with the U.S. 10-year Treasury yield rising to around 4.8%. That could complicate the Federal Reserve’s inflation fight and strengthen expectations for additional rate increases.
For crude markets, the near-term direction remains heavily dependent on the U.S.-Iran conflict and shipping conditions in Hormuz. Further military escalation or disruption to tanker traffic could keep Brent above $90 and potentially push prices back toward recent highs.
Gold Falls 1.5% as Treasury Yields Surge and Fed Rate-Hike Bets Rise
Gold prices fell sharply on Tuesday as rising U.S. Treasury yields and growing expectations for a Federal Reserve rate hike outweighed safe-haven demand generated by renewed U.S.-Iran tensions.
December gold futures dropped about 1.5% to $4,416.60, extending the pullback that began after Fed Chair Kevin Warsh’s hawkish Jackson Hole speech.
The biggest pressure came from the bond market. The U.S. 10-year Treasury yield climbed to around 4.79%, its highest level since January 2025, as a global government-bond selloff intensified. Higher yields increase the opportunity cost of holding non-yielding assets such as gold.
Warsh’s comments remain another major headwind. After signaling that the Fed may need to tighten policy if inflation does not return toward its 2% target, traders are now pricing roughly a 66% probability of a September rate hike. (Reuters)
Renewed fighting between the U.S. and Iran would normally support gold through safe-haven demand. This time, however, the conflict has also pushed Brent crude above $90 per barrel, raising concerns that another energy shock could keep inflation elevated and force the Fed to maintain tighter monetary policy. That inflation-and-rates effect is currently outweighing gold’s geopolitical support.
Attention now turns to U.S. labor-market data, particularly ADP employment and Friday’s nonfarm payrolls report. Strong employment figures could reinforce expectations for a September Fed hike and keep pressure on gold, while weaker data could provide room for bullion to recover.
Eurozone Inflation Jumps to 3.3% in August, Strengthening ECB Rate-Hike Expectations
Eurozone inflation accelerated sharply in August, increasing pressure on the European Central Bank as higher energy prices linked to the Iran conflict continue to feed into consumer prices.
Annual inflation rose to 3.3% from 2.9% in July, matching market expectations and moving further above the ECB’s 2% target. Energy was the main driver, with energy prices surging 14.3% year over year as crude oil and natural gas costs increased.
Underlying inflation offered a more encouraging signal. Core CPI, which excludes volatile food and energy components, eased to 2.4% from 2.5%, slightly below the 2.5% forecast. Services inflation also slowed to 3.0% from 3.3%, suggesting the energy shock has not yet developed into broad-based price pressure.
Meanwhile, the eurozone unemployment rate rose to 6.4% in July, compared with expectations for 6.3%, indicating some softening in the labor market.
The inflation figures strengthen expectations that the ECB will raise interest rates at its September 10 meeting. Markets are increasingly expecting a 25-basis-point increase in the deposit rate to 2.50%, which would represent the ECB’s second rate hike this year.
The overall picture remains complicated for policymakers: headline inflation is accelerating because of the energy shock while core inflation and labor-market data are showing less pressure. This supports another near-term ECB hike but could make policymakers more cautious about committing to an extended tightening cycle.
German Manufacturing PMI Jumps to 54.3 as Industrial Recovery Accelerates
Germany’s manufacturing sector strengthened sharply in August, providing further evidence that the country’s long-struggling industrial economy is gaining momentum.
The HCOB Germany Manufacturing PMI rose to 54.3 from 52.2 in July, exceeding the preliminary estimate and market forecast of 54.1. The reading marked a 51-month high and remained comfortably above the 50 threshold separating expansion from contraction.
German Retail Sales Plunge 3.4% in July, Far Below Expectations
German retail sales fell sharply in July, signaling renewed weakness in household consumption despite Germany’s broader economic recovery.
Retail sales declined 3.4% month over month in real terms, dramatically missing expectations for a 0.4% increase. June’s reading was revised to unchanged from the previous month.
The much weaker-than-expected report is generally negative for the euro and reinforces concerns about the sustainability of Germany’s economic recovery.
UK House Prices Rise 0.2% in August but Annual Growth Misses Forecast
UK house prices returned to monthly growth in August, although the housing market remained subdued amid elevated mortgage rates and broader economic uncertainty.
Nationwide’s House Price Index increased 0.2% month over month, beating expectations for a 0.1% rise and reversing July’s revised 0.1% decline. It was the first monthly increase since April.
On an annual basis, house prices rose 1.6%, accelerating from 1.4% in July but falling short of the 2.1% forecast provided in the economic calendar. The average UK home price stood at £275,465 in August.
China Manufacturing PMI Rises to 51.5 as Factory Activity Strengthens
China’s manufacturing sector expanded at a faster pace in August, providing a positive signal for the world’s second-largest economy as factory demand, production and exports improved.
The RatingDog China General Manufacturing PMI, compiled by S&P Global, rose to 51.5 from 50.9 in July, beating expectations of 51.0. A reading above 50 indicates expansion.
Factory output increased at the fastest pace in three months, supported by stronger demand and additional production capacity. New orders also accelerated, while new export business recorded its strongest increase in six months.
Overall, the RatingDog data are moderately positive for China’s growth outlook and could support sentiment toward Chinese equities and industrial commodities, although weak domestic demand and persistent pricing pressure remain important risks.
Japan Capital Spending Beats Forecast as 10-Year JGB Yield Approaches 3%
Japanese corporate investment strengthened in the second quarter, while government borrowing costs climbed to their highest levels in decades, reinforcing expectations that the Bank of Japan could continue tightening monetary policy.
Capital spending increased 1.6% year over year in Q2, significantly outperforming expectations for a 0.2% decline and accelerating from virtually no growth in the previous quarter.
The stronger investment figures suggest Japanese businesses remain relatively resilient despite geopolitical and energy-price uncertainty. Corporate profits also increased sharply during the quarter, while AI-related investment has been supporting spending in some industries.
Meanwhile, Japan's 10-year government bond auction produced an average yield of 2.995%, up sharply from 2.840% at the previous auction. The highest accepted yield reached 3.011%, as the benchmark 10-year JGB yield touched the psychologically important 3% level for the first time since 1996.
Japanese yields have been rising as investors price in higher inflation risks, fiscal concerns and the possibility of additional Bank of Japan rate hikes. Renewed tensions involving Iran and higher oil prices have added to inflation concerns globally.
The combination of stronger-than-expected business investment and rising bond yields strengthens the case for further BOJ policy normalization. For markets, that could provide support for the yen while keeping upward pressure on Japanese borrowing costs.
L3Harris Promotes SKY RAIDER II as Lower-Cost Complement to Advanced Fighter Fleets
L3Harris Technologies (NYSE: LHX) is highlighting its SKY RAIDER II INTERNATIONAL aircraft as a way for international militaries to expand persistent intelligence, surveillance and reconnaissance and light-strike capacity without consuming valuable flight hours from fourth- and fifth-generation fighters.
According to L3Harris, shifting routine missions from advanced fighters to SKY RAIDER II could save between $20,000 and $40,000 per flight hour. The aircraft is designed to handle missions where unmanned aircraft provide insufficient capability but deploying a high-end fighter would be unnecessarily expensive, preserving fighters for air defense and advanced strike missions.
SKY RAIDER II offers up to eight hours of endurance and 6,000 pounds of payload capacity across 11 hard points. Its modular architecture can integrate L3Harris technologies including Red Wolf long-range precision-strike systems, Green Wolf electronic-warfare capabilities and WESCAM electro-optical and infrared sensors.
The initiative reflects L3Harris’ push to position the platform as an affordable complement rather than a replacement for fighter aircraft. Growing defense spending and demand for lower-cost ISR, armed overwatch and precision-strike capacity could expand the international market opportunity for the platform and L3Harris’ associated sensors, electronic-warfare and weapons systems.
