Stocks inch up, oil dips as traders eye US-Iran talks

On August 12, global equities experienced a slight increase, while oil prices declined as traders watched the prospects of negotiations to resolve the Iran war and U.S. data indicating a minor rise in inflation. The ongoing talks between the U.S. and Iran remained stalled. The United States and the Iran-aligned Houthis in Yemen each claimed responsibility for separate attacks on ships.

Despite this, oil prices saw a downward trend as investors took into account lower demand forecasts. Inflation data released on Wednesday showed a 0.1% increase in U.S. consumer prices, aligning with expectations, potentially reducing the probability of a Federal Reserve rate increase in the coming month. Money markets indicated a 50% chance of a rate hike heading into the data release, alleviating some concerns about the Fed propelling interest rates due to inflation fueled by higher energy prices, according to Robert Pavlik, a senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.

Gold prices surged by over 1% as investors discounted the possibility of rate hikes. The MSCI gauges of stocks worldwide climbed 0.37% to 1,154.92. Wall Street saw the Dow Jones Industrial Average rise 0.10% to 53,848.98, the S&P 500 increase 0.31% to 7,752.35, and the Nasdaq Composite gain 0.65% at 26,617.60. Upbeat results from AI cloud company CoreWeave after the market closed on Tuesday further propelled the AI sector.

In Europe, the STOXX 600 index dropped 0.04%, while the FTSEurofirst 300 index declined 0.09%. In Asia, MSCI's broader Asia-Pacific index outside Japan rose 0.92% to 1,636.51. Emerging market stocks also gained 1.05% to 1,682.95. Discussions aimed at ending the Iran war and reopening the Strait of Hormuz for shipping traffic continued.

Iran's top security official stated that the Strait of Hormuz would remain closed until the U.S. accepts Iran's conditions. However, market participants have remained composed. Dorian Carrell, head of multi-asset income at Schroders, mentioned that a gradual but messy de-escalation is their long-held expectation, implying that the Strait of Hormuz will not return to full capacity and maintains energy-driven inflationary pressures in the near to medium term.