Oil holds above US$88 as Hormuz crisis keeps markets on edge

Oil prices remained near recent highs on Monday as traders grappled with ongoing risks to Middle Eastern supplies and stalled US-Iran negotiations. Brent crude dipped 0.1% to $88.48 per barrel, while US West Texas Intermediate (WTI) edged above $82. Persistent concerns over the Strait of Hormuz, where shipping traffic remains significantly reduced following attacks on tankers, kept markets edgy.

The geopolitical risks were further heightened by Israeli strikes in Lebanon, raising fears of a potential regional escalation. The US dollar showed weakness, under pressure from weaker-than-expected economic data and reduced expectations of a Federal Reserve rate hike this year. Currency markets saw the euro remain relatively stable, while the Australian and New Zealand dollars remained flat.

Investors will closely monitor the Federal Reserve's July meeting minutes for further insights into the central bank's monetary policy outlook, with expectations of a possible rate hold. Capital Economics analysts noted mixed Japanese economic growth data, with the economy expanding at a decent pace despite weak growth and increased government consumption indicative of expansionary fiscal policies.

Bitcoin and ether both saw slight declines, while the US dollar remained cautious against the offshore yuan ahead of China's economic data release.