Oil prices rally, Wall Street retreats with Hormuz, inflation in focus

Oil prices surged by 5% on Monday, while Wall Street indexes declined, with traders focusing on Federal Reserve interest rates and the potential Iran-US deal to open the Strait of Hormuz. The Dow Jones Industrial Average dropped 0.11% to 53,975.98, the S&P 500 fell 0.06% to 7,753.11, and the Nasdaq Composite decreased 0.32% to 26,605.36.

Iran's insistence on specific conditions before reopening the Strait added uncertainty to markets. Brent crude futures climbed to $87.72 a barrel, and US West Texas Intermediate crude reached $82.13, up 5.05%. Markets are closely watching the July US inflation reading on Wednesday, which will influence Fed officials' rate decisions.

Economists anticipate a year-on-year increase of 3.4% in the Consumer Price Index, compared to 3.5% in the previous month. Analysts see no Fed hikes this year, given the inflation report's impact. Asian shares climbed, with MSCI's Asia-Pacific index outside Japan up 0.61% to 1,628.74. Emerging market stocks rose 0.69% to 1,669.27.

Strong corporate earnings, with earnings per share up 30% year-to-date, have propelled stock markets to record highs. This week's earnings include semiconductor, networking equipment, and cloud infrastructure companies. Bond yields increased, with the US 10-year note yield at 4.701%. The dollar index rose 0.17% to 99.81, with the euro falling 0.14% to $1.1542.

The Bank of Japan warned of rising inflation risks, supporting the case for a September interest rate hike. Gold prices touched a nine-week peak at $4,419.70 an ounce.