Oil, gold prices rise as geopolitical tensions mount before CPI

Oil and gold prices surged while regional stocks flirted nervously higher on Wednesday as geopolitical tensions escalated ahead of crucial U.S. inflation figures. The Japanese yen remained relatively stable against the U.S. dollar following Japan and the United States' rare currency market intervention. The U.S. and Yemen's Iran-allied Houthi rebels claimed separate attacks on vessels, while North Korea launched a missile off its eastern coast.

Market focus shifted to the upcoming U.S. Consumer Price Index data for clues on a potential Federal Reserve interest rate hike. Analysts noted that geopolitical risks and the impending U.S. CPI report kept sentiment cautious, with oil prices trending upward and U.S. indices hovering. Brent crude climbed 0.78% to $89.60 per barrel, while U.S. crude rose 0.89% to $83.94 a barrel.

Spot gold also gained 0.46% to $4,387.03 an ounce, while MSCI's Asia-Pacific index outside Japan rose 0.5%. Japan's Nikkei share gauge traded flat after reopening from a holiday. The Houthi attack on an Egyptian-owned ship resulted in four crew deaths, marking the first such incident since Iran's war with the U.S. began on February 28.

Despite persistent claims of an imminent deal, the war shows no signs of ending. North Korea's missile launch came days before joint military drills by South Korea and the U.S. Taiwan criticized planned naval exercises between China and an Indonesian warship near Taiwan. The upcoming CPI data will not capture the recent surge in energy costs but could influence expectations for the Fed meeting.

If CPI prints at zero, Treasuries might rally as markets adjust to the Fed's potential tightening. Markets are also anticipating an early rate hike in Japan, which is putting pressure on shorter-dated Japanese government bonds. The 5-year bond yield reached a record high of 2.1%, while the 2-year yield peaked at 1.63%. The dollar index rose 0.04% to 99.85, while the euro dipped 0.02% to $1.1538.

The yen weakened 0.03% to 159.31 per dollar, remaining off its recent high of 155.20 after suspected intervention. Sterling slipped 0.01% to $1.3501. In early European trading, the Euro Stoxx 50 futures were down 0.15% at 6,563, the German DAX fell 0.12% at 26,444, and the FTSE slipped 0.25% to 10,825. U.S. stock futures were up 0.03% at 7,750.