Brent closed at US$88.91 on Tuesday, up more than 6% this week
Oil settled at its highest level since July 31 on Tuesday as hopes faded for a United States-Iran deal to reopen the Strait of Hormuz, a stalemate that analysts at Deutsche Bank said is stoking inflation fears and fresh speculation about central bank rate hikes.
Brent crude, the international benchmark, rose 1.4 percent to settle at US$88.91 a barrel, while US West Texas Intermediate gained 1.3 percent to US$83.20, according to Reuters.
Both marked their highest closes since July 31 for a second straight session, after jumping about 5 percent on Monday.
Brent has climbed more than 6 percent this week and, per Reuters, is up roughly 44 percent this year.
Earlier in the session it touched US$90 for the first time in two weeks before receding, the New York Times reported.
Worries about a protracted standoff were feeding fears of higher inflation, analysts at Deutsche Bank wrote in a research note.
“That in turn led to mounting speculation about central bank rate hikes, with investors pricing in a more hawkish path for the months ahead,” they wrote.
In Canada, the loonie firmed to a two-month high.
The currency traded 0.1 percent higher at 1.3920 per US dollar, or 71.84 US cents, after touching 1.3916, its strongest intraday level since June 10, Reuters reported.
“The loonie continues to trade with the wind at its back,” strategists at Monex Europe said in a note, pointing to strong jobs data and higher oil prices.
Canada added 75,100 jobs in July and its unemployment rate fell to a two-year low, figures released last Friday showed.
Canadian bond yields eased across the curve, tracking US Treasuries, with the 10-year yield down 2.6 basis points at 3.695 percent after earlier reaching 3.755 percent, its highest since May 2024.
Investors were awaiting US consumer price data due Wednesday.
The New York Times reported that economists expected the July reading to show inflation had cooled, while Reuters reported forecasts of a renewed pickup after a June decline.
Trade posed a further risk to the currency: Canadian and US officials were working on a potential deal to pitch to US President Donald Trump next week, CBC News reported, citing sources not authorized to speak on the record, even as Trump prepared a new round of tariffs on Canadian goods set to take effect the same week.
“Trade headlines remain a key event risk,” the Monex Europe strategists added.
The rally traced back to the deadlock over Hormuz, the waterway that carried roughly a fifth of global oil supply before the war began on February 28.
The strait will stay shut until Washington changes its behaviour and meets Tehran’s conditions, the secretary of Iran’s Supreme National Security Council, Mohsen Rezaei, said on Tuesday, demanding the US unfreeze Iranian funds held overseas, according to Reuters.
Trump, meanwhile, escalated his rhetoric, saying on social media on Monday that he had directed aides to seek compensation from Iran, the New York Times reported.
Traffic through the strait has collapsed.
Kpler data put Monday’s transits in the single digits, with Reuters counting six vessels against a 10-day average of about 11, and CNBC reporting eight.
Between 125 and 140 vessels a day passed through before the war, per Reuters.
Diplomatic signals were mixed.
Pakistan’s defence minister, Khawaja Asif, told Bloomberg News that “things are shaping up again in favor of a peace arrangement or a deal,” though a US-Iran agreement Islamabad brokered in June collapsed within weeks.
A week earlier, the US treasury secretary, Scott Bessent, had told CNBC a new deal could come soon.
Supply strains showed few signs of easing.
Some Middle East producers will likely struggle to restore output to pre-war levels by the end of 2027, even if trade normalizes early next year, the US Energy Information Administration said Tuesday.
Analysts estimated US crude inventories fell by about 0.5m barrels in the week ended August 7, which would be a second draw in three weeks against an average build of 3.1m barrels over the past five years.
Stocks in the US Strategic Petroleum Reserve have dropped below 300m barrels, the lowest in more than four decades, after Trump ordered the release of 172m barrels in March, CNBC reported, citing Department of Energy data.
Offsetting some of that pressure, the US energy secretary, Chris Wright, said exports through Hormuz had reached a seven-day average of 9m barrels a day, with total Gulf flows near 15m barrels when pipelines are counted.
A Saudi-run alternative route through the Red Sea has meanwhile grown riskier: Reuters reported a Houthi attack on a Saudi vessel carrying military equipment in Bab el-Mandeb, while the New York Times reported a strike on a cargo ship carrying food that killed at least six people.
