Oil Prices Pare Losses on Saudi Supply Jitters; Gold Rally Cools

Oil prices pared earlier losses on Friday following reports of a significant pipeline disruption in Saudi Arabia, while gold's recent rally showed signs of cooling as a strengthening U.S. dollar and the prospect of further global interest rate hikes weighed on the precious metal.

Geopolitical Tensions Buoy Oil Prices

Prices for Brent crude, the international benchmark, recovered after a Bloomberg News report stated that state-owned Saudi Aramco had informed at least two European refiners of its inability to supply crude oil next month. The disruption reportedly stems from an attack on a major east-west pipeline that transports oil to the Red Sea.

The news heightened concerns over supply stability amid an escalating conflict between Saudi Arabia and Iran-backed Houthi rebels in Yemen. The rebels' advance has increased their control over the Bab el-Mandeb strait, a critical chokepoint for global oil shipments. However, market sentiment was tempered by reports that Saudi Arabia aims to restore about half of the pipeline's capacity within days, countering initial fears of a weeks-long outage.

Gold Rally Pauses Amid Rate Hike Concerns

The rally in gold prices lost momentum Friday, with the metal struggling to extend sharp gains from the previous session. Spot gold was last up approximately 0.4%, bringing its weekly gain to around 0.9%. The move follows a more than 2% surge on Thursday that pulled the price off a near six-week low.

Ad

The rebound in energy prices is fueling investor concern that persistent inflation could force central banks to continue tightening monetary policy. Higher interest rates typically increase the opportunity cost of holding non-yielding assets like gold. The Bank of Japan raised its interest rates on Friday, becoming the latest major central bank to tighten policy after recent hikes by the U.S. Federal Reserve and the European Central Bank.

Dollar Strength Adds Headwinds

Adding further pressure on gold was a stronger U.S. dollar. The U.S. Dollar Index, which measures the greenback against a basket of major currencies, climbed 0.3% to 100.51. A rising dollar makes gold more expensive for buyers using other currencies.

Analysts at ING warned of "upside risk" for the dollar, according to the source material, citing hawkish signals from the Federal Reserve. They noted that markets could fully price in another rate hike in October if economic data and energy prices support such a move.