Oil advances, stocks drift on fresh US-Iran strikes ~ EconomyLens.com

London (AFP) – Oil prices rose slightly and global stock markets drifted Thursday after the United States and Iran exchanged new strikes despite their purported ceasefire, rekindling uncertainty about an end to the Middle East war. Crude prices slipped back after earlier jumping around 2.5 percent off Wednesday’s sharp declines, as a deal to stop a conflict that has all but halted shipping through the crucial Strait of Hormuz remains elusive. The latest strikes were the most serious since an April ceasefire and came despite a series of headlines suggesting talks on a deal were progressing.

“A fresh exchange of strikes between the two countries is testing the fragile ceasefire and forcing a reassessment of the chances of a near-term agreement which can reopen the Strait of Hormuz and dial down the pressure the crisis is putting on the global economy,” said AJ Bell investment director Russ Mould. Brent crude was up 0.5 percent at $94.77 a barrel while the primary US benchmark West Texas Intermediate stood up 1.2 percent at $89.70 a barrel.

Wall Street started sluggishly but more than two hours into trading, the Dow was just into the green, up 0.1 percent at 50,680.29 points, while the broader based S&P 500 and the tech-heavy Nasdaq added around half of one percent. Major European indices closed in the red, as London lost 0.7 percent, while Frankfurt and Paris lost around a quarter of one percent.

Wall Street was digesting news that the US Federal Reserve’s preferred inflation measure rose in April by its highest year-on-year rate since 2023. The personal consumption expenditures (PCE) index jumped 3.8 percent from a year ago, the Commerce Department said, in line with expectations and up from 3.5 percent in March, as the economic fallout of President Donald Trump’s Iran war continued to hit Americans. The US also revised down its first-quarter GDP growth to 1.6 percent from 2.0 percent, as investment and consumer spending slowed.

The combination of persistent inflation and slowing growth lowers the chances of interest rate cuts by the Federal Reserve, despite President Donald Trump’s repeated calls for lower rates to support the world’s biggest economy. “Even after stripping out energy prices, core PCE is sitting at a multi-year high. In response, the Fed has already taken on a more hawkish posturing in response to higher inflation,” said Bret Kenwell, US investment analyst at eToro.

“The concern now is whether higher energy prices begin to filter into non-energy categories, making inflation harder for both consumers and the Fed to look through,” he said. Asian markets meanwhile saw losses, with the main benchmarks in Hong Kong, Taipei, and Sydney closing down more than one percent, and Shanghai the sole major exchange to buck the trend, adding just 0.1 percent.