Gold slumps as higher inflation boosts rate hike expectations

The energy sector rose as attacks on oil tankers in the Middle East intensified. Precious metals slumped after stronger than expected inflation in the US.

Crude oil rallied as hostilities intensified in the Middle East, threatening further supply disruptions. The Iranian-backed Houthis continued drone and missile attacks on Saudi Arabia, hitting the headquarters of the state-owned oil producer. Oil production hasn’t been affected, despite damage to buildings containing the operations management office. Meanwhile, attacks on oil tankers in the Persian Gulf continued unabated. Moreover, Iran’s focus is shifting beyond the Strait of Hormuz, with attacks on vessels in the Gulf of Oman and around the port of Fujairah becoming more common. This could threaten not only the smaller vessels that are part of the shuttle system that has enabled strong flows of oil, but the very large crude carriers taking oil to its destinations. Hopes that an energy ceasefire in the Russia-Ukraine conflict would ease constraints on diesel supplies were dashed, after further attacks on Russian refineries. Russia accused Ukraine of attacking two oil refineries in the Saratov and Ryazan regions on Wednesday. The latter is home to one of the largest refineries in the country, with a capacity of around 400kb/d.

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