World stocks inch up as oil drops on Hormuz hopes ahead of data, Nvidia results

Global stocks made slight gains on Wednesday, as oil prices declined due to optimism surrounding the potential reopening of the strategic Strait of Hormuz, and investors prepared for U.S. inflation data and Nvidia's upcoming earnings report. Iran and Oman had discussed a temporary navigational corridor through the Hormuz, clearing it of mines, which sparked renewed hope for resolving the ongoing six-month conflict impacting oil markets and global inflation concerns.

Brent crude futures experienced a third consecutive daily drop, falling around 3% to $85.95 per barrel due to the anticipated increase in supply through the Hormuz, which previously facilitated a fifth of the global traded oil. This shift contributed to a decline in short-term bond yields, reflecting expectations from central bank interest rate decisions.

Yields on 2-year German bonds fell to a seven-week low of 2.771%, while U.S. bond yields remained relatively stable at 4.195%. Fiona Cincotta, a senior markets analyst at City Index, noted that while oil prices have softened from their recent surge, a resumption of traffic in the Hormuz remains crucial for investors to gauge a potential cooling of inflationary pressures.

Markets are now eagerly anticipating the release of the U.S. Personal Consumption Expenditures Price Index, scheduled for release at 12:30 GMT, which could offer insights into the Federal Reserve's monetary policy direction. Wall Street futures remained relatively unchanged ahead of the data release. The odds of a September interest rate hike dropping to 36%, down from roughly 67% earlier in the month, as recent data suggested a moderate moderation in price pressures. However, the Federal Reserve is still expected to raise rates by year-end.

Expectations for a single rate increase before the end of the year persist, but analysts doubt its occurrence in September due to oil price volatility and divergence within the Federal Reserve. Cincotta commented that while Nvidia's shares have gained 14% this year, the company's potential earnings growth remains uncertain, pending a successful earnings report.

The stock was up 0.3% in pre-market trading, along with rivals such as Advanced Micro Devices and Broadcom. The broader market sentiment was positive, with MSCI's world stocks index up 0.1%.