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Oil Holds on to Last Week’s Gains Buoyed by Mideast Tensions

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
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Oil Holds on to Last Week’s Gains Buoyed by Mideast Tensions

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)

Oil prices were little changed in early Asian trading on Monday, holding on to most of last week's more than 3% gains, supported by geopolitical tensions and better economic data.

Brent crude futures fell 7 cents, or 0.09%, to $79.59 a barrel by 0021 GMT, while US West Texas Intermediate crude futures rose 2 cents, or 0.03%, to $76.86.

"Traders remain mindful of simmering tensions in the Middle East," ANZ analysts said in a note, Reuters reported. .

The risk of an escalation in the Israeli-Palestinian conflict continued to support prices after Iran and Hezbollah vowed to retaliate for the assassinations of Hamas leader Ismail Haniyeh and Hezbollah military commander Fuad Shukr.

The Israeli incursion into Gaza intensified on Saturday with an airstrike on a school compound that killed at least 90 people, according to the Gaza Civil Emergency Service, though Israel said the death toll was inflated. Hamas cast doubt on its participation in new ceasefire talks on Sunday.

Brent ended last week up more than 3.5% on the week, while WTI gained more than 4%, on supportive economic data and increased hopes of a US interest rate cut.

Three US central bankers said last week that inflation appeared to be cooling enough for the Federal Reserve to cut interest rates as soon as next month.

China's consumer prices rose faster than expected in July, and US weekly jobless claims fell more than expected last week.

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Federal Reserve Cuts Key Rate by Sizable Half-point

News screens display the Federal Reserve rate announcement on the trading floor at The New York Stock Exchange (NYSE) in New York City, US, September 18, 2024. REUTERS/Andrew Kelly
News screens display the Federal Reserve rate announcement on the trading floor at The New York Stock Exchange (NYSE) in New York City, US, September 18, 2024. REUTERS/Andrew Kelly
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Federal Reserve Cuts Key Rate by Sizable Half-point

News screens display the Federal Reserve rate announcement on the trading floor at The New York Stock Exchange (NYSE) in New York City, US, September 18, 2024. REUTERS/Andrew Kelly
News screens display the Federal Reserve rate announcement on the trading floor at The New York Stock Exchange (NYSE) in New York City, US, September 18, 2024. REUTERS/Andrew Kelly

The Federal Reserve on Wednesday cut its benchmark interest rate by an unusually large half-point, a dramatic shift after more than two years of high rates helped tame inflation but that also made borrowing painfully expensive for American consumers.
The rate cut, the Fed’s first in more than four years, reflects its new focus on bolstering the job market, which has shown clear signs of slowing, The Associated Press reported. Coming just weeks before the presidential election, the Fed’s move also has the potential to scramble the economic landscape just as Americans prepare to vote.
The central bank’s action lowered its key rate to roughly 4.8%, down from a two-decade high of 5.3%, where it had stood for 14 months as it struggled to curb the worst inflation streak in four decades. Inflation has tumbled from a peak of 9.1% in mid-2022 to a three-year low of 2.5% in August, not far above the Fed’s 2% target.
The Fed’s policymakers also signaled that they expect to cut their key rate by an additional half-point in their final two meetings this year, in November and December. And they envision four more rate cuts in 2025 and two in 2026.
In a statement, the Fed came closer than it has before to declaring victory over inflation: It said it “has gained greater confidence that inflation is moving sustainably toward 2%.”
Though the central bank now believes inflation is largely defeated, many Americans remain upset with still-high prices for groceries, gas, rent and other necessities. Former President Donald Trump blames the Biden-Harris administration for sparking an inflationary surge. Vice President Kamala Harris, in turn, has charged that Trump’s promise to slap tariffs on all imports would raise prices for consumers even further.
Rate cuts by the Fed should, over time, lower borrowing costs for mortgages, auto loans and credit cards, boosting Americans’ finances and supporting more spending and growth. Homeowners will be able to refinance mortgages at lower rates, saving on monthly payments, and even shift credit card debt to lower-cost personal loans or home equity lines. Businesses may also borrow and invest more.
Average mortgage rates have already dropped to an 18-month low of 6.2%, according to Freddie Mac, spurring a jump in demand for refinancings.
The Fed’s next policy meeting is Nov. 6-7 — immediately after the presidential election.