Oil, gold prices rise as geopolitical tensions mount before CPI

Oil and gold prices rose on Wednesday as regional shares edged higher, amid escalating geopolitical tensions ahead of crucial U.S. inflation data. The Japanese yen remained relatively stable against the U.S. dollar, following a recent intervention from both Japan and the United States. Tensions escalated with separate attacks reported by the U.S. and Iran-aligned Houthis on shipping, alongside an early missile launch by North Korea.

Market attention remained focused on the upcoming U.S. consumer price index data, which could provide clues about potential Federal Reserve rate hikes. Senior financial market analyst Kyle Rodda noted that market sentiment was cautious due to lingering geopolitical risks and the upcoming CPI data. U.S. crude oil prices increased by 0.89% to $83.94 per barrel, while Brent crude rose by 0.78% to $89.60 per barrel.

Gold prices also climbed by 0.46% to $4,387.03 per ounce. In Asia, the MSCI Asia-Pacific index outside Japan gained 0.5%, and Japan's Nikkei share gauge traded flat after reopening from a holiday. The attack by Houthis resulted in the death of four Egyptian crew members on Tuesday, marking the first such incident since the Iran war began on February 28.

Despite repeated claims of an imminent deal, the ongoing Iran war shows no signs of resolution. North Korea conducted a missile launch days before major joint military exercises between South Korea and the U.S., which Pyongyang had strongly condemned. Taiwan also criticized planned naval drills between China and an Indonesian warship near Taiwan.

The upcoming CPI data, though not capturing the most recent energy cost rise, will still be crucial in shaping expectations for the Federal Reserve's upcoming meeting, with markets currently showing an equal chance of a rate hike. Consumer prices are projected to increase by 0.1% in July, with annual inflation expected to slow to 3.4%.

Market participants are also pricing in an early rate hike in Japan, exerting pressure on the nation's shorter-dated bonds. The 5-year Japanese government bond yield reached a record high of 2.1%, while the 2-year yield peaked at 1.63%. The dollar index rose by 0.04% to 99.85, with the euro down by 0.02% to $1.1538, and the Japanese yen weakening by 0.03% to 159.31 per dollar.