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Oil Rises on Risk of Broadening Middle East Conflict

Oil pump jacks work at sunset near Midland, Texas, US, August 21, 2019. REUTERS/Jessica Lutz/File Photo
Oil pump jacks work at sunset near Midland, Texas, US, August 21, 2019. REUTERS/Jessica Lutz/File Photo
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Oil Rises on Risk of Broadening Middle East Conflict

Oil pump jacks work at sunset near Midland, Texas, US, August 21, 2019. REUTERS/Jessica Lutz/File Photo
Oil pump jacks work at sunset near Midland, Texas, US, August 21, 2019. REUTERS/Jessica Lutz/File Photo

Oil prices rose in early Asian trading on Thursday, extending strong gains in the previous session after the killing of a Hamas leader in Iran raised the threat of a wider Middle East conflict and on signs of strong oil demand in the US.
Global benchmark Brent crude futures rose 67 cents, or 0.8%, to $81.51 per barrel by 0007 GMT, while US West Texas Intermediate crude futures rose 69 cents, or 0.9%, to $78.60 per barrel.
The most active contracts on both benchmarks jumped about 4% in the previous session, Reuters reported. 
Hamas leader Ismail Haniyeh was assassinated in the Iranian capital Tehran on Wednesday, less than 24 hours after Lebanon-based Hezbollah's most senior military commander was killed in an Israeli strike in the capital, Beirut.
The killings fuelled concern that the 10-month-old war in Gaza between Israel and Hamas was turning into a wider Middle East war, which could potentially lead to disruptions in oil supply from the region.
"We fear the region is at the brink of all-out war," Japan's deputy United Nations representative Shino Mitsuko said on Wednesday as the UN security council called for stepped-up diplomatic efforts.
Also pushing up oil prices was a set of data releases from the US, the world's top oil consumer, and a weaker dollar.
Robust export demand pushed US crude oil stockpiles lower by 3.4 million barrels in the week ended July 26 to 433 million barrels, data from the US Energy Information Administration (EIA) showed on Wednesday.
US oil stocks have declined for five consecutive weeks, the longest such streak since January 2021.
US oil demand was at a seasonal record in May as gasoline consumption surged to its highest since before the pandemic, a separate data release from the EIA showed on Wednesday.
Meanwhile, the US dollar index extended losses on Thursday from the previous session, after the Federal Reserve held interest rates steady but left the door open for a cut in September. A weaker dollar can boost oil demand from investors holding other currencies.

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Euro Zone Inflation Edges up in 'Difficult Print' for ECB

A general view of a fruit and vegetable stand on a weekly market in Berlin, Germany, March 14, 2020. REUTERS/Annegret Hilse/File Photo Purchase Licensing Rights
A general view of a fruit and vegetable stand on a weekly market in Berlin, Germany, March 14, 2020. REUTERS/Annegret Hilse/File Photo Purchase Licensing Rights
TT
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Euro Zone Inflation Edges up in 'Difficult Print' for ECB

A general view of a fruit and vegetable stand on a weekly market in Berlin, Germany, March 14, 2020. REUTERS/Annegret Hilse/File Photo Purchase Licensing Rights
A general view of a fruit and vegetable stand on a weekly market in Berlin, Germany, March 14, 2020. REUTERS/Annegret Hilse/File Photo Purchase Licensing Rights

Euro zone inflation unexpectedly edged up in July, data showed on Wednesday, although a widely watched gauge of price growth in the services sector eased.

Wednesday's figures did not seem to derail market expectations for an interest rate cut by the European Central Bank in September, but they were likely to strengthen concerns about a difficult last mile in the ECB's efforts to bring down inflation.

According to Reuters, price growth in the 20 countries that share the euro accelerated to 2.6% in July from 2.5% in June according to Eurostat's flash estimate.

A key measure of underlying growth in prices -- which excludes energy, food, alcohol and tobacco -- failed to show the expected decline and came in unchanged at 2.9%.

"It's a difficult print for the ECB," said Fabio Balboni, an economist at HSBC. "Disinflation on the goods side is coming to an end and services inflation remains high."

Still, Balboni stuck to his call for ECB cuts in September and December, as did investors in euro zone money markets, on expectations that inflation would eventually ease.

A general view of a fruit and vegetable stand on a weekly market in Berlin, Germany, March 14, 2020. REUTERS/Annegret Hilse/File Photo Purchase Licensing Rights.

"I still expect a second rate cut to come in September," said Kyle Chapman, a foreign exchange markets analyst at Ballinger Group. "I don’t think it matters too much if we get the odd data point that’s slightly stronger than expected."

Euro zone inflation has fallen a long way since briefly hitting double digits in late 2022, when it had been boosted in large part by a brisker-than-expected reopening of the economy after the COVID-19 pandemic and more expensive fuel in the wake of Russia's invasion of Ukraine.

But that progress has stalled in recent months as prices in the services sector got a boost from higher salaries.

In a small, positive sign for the ECB, services' price growth eased to 4.0% from 4.1% in June as an expected boost from the Olympics in Paris failed to materialise, with some consumers balking at what they saw as price-gouging.

"This kind of pushback bodes well for the medium term inflation outlook," economists at ABN-Amro wrote in a note.

The ECB has made clear it would not be swayed by individual data points and will focus instead on the broader trend for inflation, which it expects to bounce around current levels this year before pulling back towards its 2% target in 2025.

The central bank started cutting rates last month, paused in July and is widely expected to slowly dial back over the next 1-1/2 years some of the steepest hikes it has made in its 25-year history.