WTI crude climbs 2.6% to $84.50 on Middle East supply risk

WTI crude futures settled 2.55% higher at $84.50 a barrel, while Abu Dhabi Murban crude surged 6.74% to $95.45, as fading hopes for a U.S.-Iran deal reignited supply risk premiums across the Middle East.

WTI crude futures settled up $2.10, or 2.55%, at $84.50 a barrel, while Abu Dhabi Murban crude surged 6.74% to $95.45, as fading prospects for a U.S.-Iran deal deepened Middle East supply risk.

Fed Chair Kevin Warsh said bringing inflation back to the 2 percent target is his top priority, a stance that gains urgency as energy costs climb. The July CPI report, due at 8:30 a.m. ET, is expected to show headline inflation cooling to 3.4 percent year-over-year from 3.5 percent in June, with core inflation at 2.5 percent.

The jump in crude prices came as investors digested the latest public comments by Iran and the Trump administration that made an imminent deal look increasingly unlikely. WTI had already climbed above $83 a barrel the previous session. Gold futures rose nearly 1 percent to $4,475 an ounce, the highest in over two months, while the 10-year Treasury yield slipped to 4.67 percent from 4.70 percent. Bitcoin edged up to $64,200.

The surge in energy costs threatens to complicate the Fed's disinflation path. A hotter-than-expected CPI reading could renew concerns that the Federal Reserve will need to raise interest rates soon, with the next policy decision now carrying added weight as oil prices feed into the broader price picture.

Murban Divergence Signals Regional Risk

The 6.74 percent jump in Abu Dhabi Murban crude to $95.45 a barrel — far outpacing the 2.55 percent gain in WTI — shows how the market is pricing a Middle East-specific risk premium. Murban, a benchmark for Gulf crude, is more directly exposed to potential supply disruptions in the Strait of Hormuz, through which roughly 20 million barrels of oil pass daily. The divergence between the two benchmarks reflects the market's assessment that the risk is concentrated in the Gulf region rather than in global demand.

NYMEX September gasoline futures settled at $3.2701 per gallon, while heating oil closed at $4.4371 per gallon. Natural gas futures settled at $2.69 per million British thermal units.

Inflation Crossroads: Oil Meets CPI

The timing of the crude rally is particularly sensitive. The July CPI report will give investors their first look at how the Iran war has affected the economy. Easing oil prices during the U.S.-Iran ceasefire helped cool inflation in June and may have done so again in July, but the pickup in fighting and oil prices toward the end of the month and into August may have limited that slowdown.

Stock futures pointed higher this morning, with Nasdaq futures up 0.7 percent and S&P 500 futures up 0.3 percent, as markets looked to rebound from two straight days of losses. The major indexes all pulled back yesterday while oil prices climbed. If crude continues to advance, the disinflation narrative that has supported equity valuations could face renewed pressure, particularly for consumer discretionary and airline stocks that carry higher energy cost exposure.

This article is for informational purposes only and does not constitute investment advice.