Oil Prices Ease on Iran Deal Hopes as Markets Await Key US Jobs Data

Oil prices eased this week on renewed optimism for a U.S.-Iran diplomatic agreement, even as investors weighed a mixed batch of corporate earnings and braced for a pivotal U.S. jobs report.

Brent crude futures drifted back toward $80 a barrel midweek, a level last seen before a short-lived ceasefire in June, following reports that Iran was nearing a deal with Oman regarding oversight of the critical Strait of Hormuz waterway, sources told Reuters. However, prices ticked modestly higher on Thursday after Yemen’s Iran-aligned Houthis attacked Saudi Arabia, highlighting the fragile geopolitical situation.

Energy Sector Sees Record Refining Profits

Despite the pullback in crude prices, major oil companies reported exceptionally strong second-quarter earnings, driven by a surge in refining profits. The results reflect a severe shortage in global refining capacity linked to geopolitical disruptions. Key figures include:

• Exxon Mobil (XOM) posted downstream profits of $5.5 billion, its strongest result since 2022.
• Chevron (CVX) saw its downstream earnings climb to $4.9 billion, the highest this decade.
• BP's (BP) refining-indicator margin, a key profitability metric, rose to $30 per barrel, up from $12 a year earlier.

Separately, seven OPEC+ members agreed to increase production by 188,000 barrels per day in September. While the immediate market impact is limited, the move signals that producers are prepared to ramp up supply quickly if the Strait of Hormuz reopens.

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Mixed Signals from Corporate Earnings

While aggregate S&P 500 earnings growth is on track to hit nearly 50% this quarter, according to LSEG data, some high-profile technology companies saw their stocks slide despite beating revenue estimates. Shares in chipmaker AMD fell 7% on Wednesday, while SpaceX dropped nearly 14% following its first earnings release as a public company, reflecting investor anxiety about the long-term sustainability of massive AI-related spending.

US Jobs Data and Fed Policy in Focus

Investors are closely watching the U.S. labor market for clues on the Federal Reserve's next move. Private payroll data from ADP on Wednesday showed employers added 44,000 workers in July, a significant slowdown from 95,000 in June. The official nonfarm payrolls report on Friday is expected to show the economy added 80,000 jobs, with the unemployment rate holding steady at 4.2%, according to economists polled by Reuters.

Futures markets now price in just over a 50% probability of a Fed rate hike in September, down from a near certainty weeks ago. This shift reflects easing oil prices and mixed signals from Fed officials, though some analysts remain concerned that underlying inflationary pressures could force the central bank's hand.