Bonds, stocks selloff pauses as oil retreats from multi-month high

Stock markets ticked higher on Friday following a volatile week, as oil prices fell from a four-month peak due to tensions in the Gulf and concerns about inflation. Despite oil reaching a four-month high of $109.97 a barrel, it later dropped about 2.9 percent to $104.49. The U.S. Consumer Price Index rose 0.4 percent last month and 0.1 percent in July, according to the Labor Department.

This prompted traders to bet on a Federal Reserve interest rate hike at their upcoming meeting. Currently, there is an 85 percent chance of a quarter-point increase, up from around 67 percent before the data. The Fed's latest policy statement and a press conference with Chairman Kevin Warsh are expected on Wednesday. Inflation is still a concern, with some traders expecting a rate hike even after the latest data.

Meanwhile, oil flows remain restricted in the Strait of Hormuz due to attacks between the U.S. and Iran, though prices have since declined.