Oil Tops $100 as Iran Conflict Rattles Markets

Oil tops $100 as the Iran conflict rattles global markets, driving safe-haven demand for gold and the Japanese yen.

The escalation in the Iran conflict pushed oil prices above the $100 mark during the US session, lifting inflation expectations and Treasury yields while weighing on US equities. Gold and the Japanese yen attracted strong safe-haven demand, while the dollar traded surprisingly softer despite the rise in yields. Thursday’s US PPI and jobless claims data now serve as the next major catalyst, with Friday’s CPI carrying even greater potential to shift expectations around the Federal Reserve’s next policy move.

Asian markets face a volatile session as oil above $100 continues to drive inflation concerns and risk aversion. A stronger yen and growing BOJ tightening expectations add further pressure to Japanese markets, keeping traders alert to sharp moves across JPY, oil, gold, and equity indices as geopolitical headlines continue to develop.

Oil Tops $100 as Iran Conflict Rattles Markets

The dollar remains under bearish pressure Thursday, though the outlook stays highly data-dependent. US PPI, unemployment claims, Treasury yields, and remarks from President Trump at 1:15 AM GMT all carry the potential to shift the greenback’s direction. Strong inflation or labour data could trigger a dollar rebound by raising expectations for a Fed hike, while softer figures would reinforce selling pressure and build the case for easier policy ahead.

At its July 28-29 meeting, the FOMC held the federal funds rate unchanged at 3.50% to 3.75% for the fifth consecutive time, voting 9-3 to maintain rates. Three policymakers, Beth Hammack, Neel Kashkari, and Lorie Logan, dissented in favour of an immediate 25 basis point increase, reflecting deepening divisions over persistent inflation. Chair Kevin Warsh stressed that future decisions remain strictly data-dependent, with the next meeting scheduled for September 15-16.

Gold Holds Support as Volatility Looms

Gold retains safe-haven support Thursday, drawing strength from a softer dollar and ongoing geopolitical risk. However, rising oil prices, climbing Treasury yields, and growing Fed rate hike expectations cap the upside. Thursday’s PPI and jobless claims releases carry significant volatility potential. Softer-than-expected inflation could push gold toward the $4,500 area, while a hotter PPI reading would likely strengthen the dollar and Treasury yields, pulling gold back toward the $4,300 region.

Australian Dollar Holds Firm on RBA Hike Bets

The Australian dollar trades with relative strength Thursday, drawing support from rising expectations of another RBA rate increase. Recent RBA commentary has emphasised that inflation remains too high, with markets pricing over a 70% probability of a further hike at the September meeting. The RBA holds its cash rate at 4.35% following three increases earlier in 2026, maintaining a restrictive stance aimed at returning inflation toward the 2% to 3% target band.

Australia’s CPI rose 3.8% year-over-year in June, easing from 4.0% in May, while trimmed-mean inflation held at 3.6%, pointing to persistent underlying price pressures. The RBA will receive the July CPI reading on August 26 and June-quarter wage data on August 19, both of which will heavily influence the September decision. The next RBA meeting takes place September 28-29.

Kiwi Dollar Faces Headwinds Despite RBNZ Hike

The New Zealand dollar remains sensitive to the RBNZ’s recent rate decision, elevated inflation, and global risk sentiment. The RBNZ raised its Official Cash Rate by 25 basis points to 2.75% at its September 2 meeting, with annual inflation running at 4.1% in the June quarter, well above the 1% to 3% target range. The central bank projects inflation to remain above 3% for the remainder of 2026 before easing back toward the 2% midpoint by late 2027.

Policymakers signalled that further hikes remain possible but emphasised a data-dependent approach. New Zealand’s economic recovery continues at an uneven pace, with household demand and the housing market remaining areas of weakness, while strong export performance provides partial support. The next RBNZ meeting falls on October 28.

Japanese Yen Builds Bullish Momentum

The yen carried strong bullish momentum Thursday, driven by a combination of BOJ tightening expectations, higher Japanese yields, repatriation flows, carry-trade unwinding, and US-Japan FX coordination. Traders are watching USD/JPY closely around the 152 to 153 area, where a sustained break lower could signal another leg of yen appreciation. A rebound attempt would likely face resistance as markets keep focus trained on the upcoming BOJ decision.

The BOJ held its short-term policy rate at 1.00% at its July 30-31 meeting, maintaining confidence in Japan’s moderate economic recovery while signalling a gradual tightening path. Core inflation remains above the BOJ’s 2% target, supported by broad-based services inflation and rising labour costs, with markets widely expecting another 25 basis point increase later in 2026. The next BOJ meeting is scheduled for September 17-18.

Oil Holds Above $100 on Hormuz Risk Premium

Brent crude’s move above $100 carries both technical and psychological significance for energy markets. Ongoing tensions around the Strait of Hormuz and Saudi energy infrastructure continue to support prices, with the potential to push crude higher if the conflict escalates further. However, any credible US-Iran de-escalation or reopening of the Strait could trigger a sharp pullback as the geopolitical risk premium unwinds rapidly. Traders remain on high alert for any headline developments that could shift the supply outlook in either direction.

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