Oil prices rise, Asia stocks drift on US-Iran stalemate

Oil prices climbed on Tuesday as talks between the United States and Iran over a peace agreement and the reopening of the Strait of Hormuz stalled, while Asian stocks hesitated amid lingering uncertainty about the global inflation outlook. U.S. President Donald Trump made fresh demands on Monday to Iran's terms for a peace deal, insisting Iran should compensate victims of wars, attacks and protests, escalating tensions and potentially prolonging efforts to restore the vital waterway.

Brent crude futures increased to $88.09 per barrel and U.S. crude futures rose to $82.52, both the highest levels since July 31, after the contracts surged roughly 5% on Monday. Analysts suggest a standoff between the two parties, with Tony Sycamore of IG remarking that "it's almost a war of attrition now." The market is anticipated to hover between $75 and $95 while waiting to see who yields first.

Rising fuel costs heighten the pressure for the U.S. July consumer price report on Wednesday, with expectations of a 0.1% rise in the headline figure and 0.2% in the core measure. If the inflation data surpasses forecasts, it could reignite expectations of a Federal Reserve rate hike next month, potentially reigniting concerns about stagflation.

The U.S. economy appears to be running hotter than a 'Goldilocks' scenario, suggesting the need for higher interest rates. The Reserve Bank of Australia maintained its cash rate at 4.35% for the second consecutive meeting, citing a slowing economy as expected but signaling a potential future rate hike if needed to combat inflation.

Asian shares experienced mixed performances, with the MSCI's Asia-Pacific index excluding Japan edging up 0.36%, while South Korea's KOSPI rose 1.3%. However, Hong Kong's Hang Seng Index slipped 0.6%, and China's CSI300 blue-chip index fell 0.05%. The yen encountered weakness against the dollar, hovering near 159, following suspected rounds of intervention by Japan and the United States.

The dollar saw a minor boost from the rebound in oil prices, but the euro remained below a recent one-month peak, trading at $1.1541. Sterling weakened from its recent one-month high and closed at $1.3511. The Australian dollar experienced a minor decline after the RBA's decision, settling at $0.7049. Gold prices rose modestly by 0.33% to $4,402.52 per ounce.