Oil wavers amid doubts about Hormuz deal, stocks ease from record

Market attention remains locked on Hormuz deal

Iran and Oman have reportedly reached a deal that would pave the way for the reopening of the Strait of Hormuz. However, there are doubts about whether the US will give the deal the green light as it would hand Iran control of inbound traffic. Iran also looks set to have oversight over sections of the outbound lane.

But a final agreement is still being drafted and may not be ready until Friday. Yet, this is only a temporary arrangement that could remain in place for two to four months, and although passing vessels would not be charged any fees during this period, tolls will likely be part of any permanent agreement.

More importantly, it’s not clear whether the Trump administration is on board with this arrangement as any deal is dependent on the US ending its naval blockade of Iranian ports. Iran will also need to be satisfied that the US is meeting its side of the bargain, while a full reopening will require the naval mines to be removed.

Oil seeks to cap losses

Most likely, the US will agree to some concessions to Iran to get traffic through Hormuz flowing again. President Trump’s prioritization to reopen the crucial strait is one reason why investors remain optimistic that a final deal will be reached by all sides.

Oil prices have plunged by more than 15% from the late July highs when tensions flared again between the two adversaries. They’re fluctuating between gains and losses today, with WTI futures finding support in the $75.00 region.

A break lower may only come if the deal is finalized, but even then, the slide may stall around the previous trough just above $67.00 unless the agreement helps to bring about meaningful progress in the ceasefire talks between the US and Iran.

Gold reaches 7-week high

Gold and other precious metals continued to capitalize on the renewed hopes of peace in the Middle East, as government bond yields tracked oil prices lower. The yellow metal is climbing for a fourth straight day on Thursday. It briefly hit $4,300 before easing to around $4,270.

Other precious metals have enjoyed an even bigger rebound, with silver rallying about 7.5% this week.

Dollar awaits NFP report for direction

The US dollar remains mostly on the backfoot, although the broader picture in FX markets is one of consolidation as traders prepare for Friday’s nonfarm payrolls report. The combination of a not-so-hawkish Fed meeting and hopes that the Hormuz Strait will reopen soon have led investors to scale back their rate hike expectations.

Fed Governor Lisa Cook is the latest Fed official to voice support for a rate hike if inflation doesn’t ease soon, but San Francisco President Mary Daly sounded more neutral.

The mixed messages from policymakers put even more focus on tomorrow’s jobs numbers, with this week’s ISM PMI numbers also failing to offer any fresh direction.

The wait-and-see mode is likely helping the yen to hold steady as the dollar attempts to crack above the 158 level, though intervention cannot be ruled out for the repeated failures this week to break that resistance.

Stock rally takes a breather after fresh highs

Equities are mostly in the green today, brushing off another selloff in Asian chip stocks following the latest earnings overnight from US chipmakers. Sandisk and Western Digital both beat their earnings expectations but it seems that investors were once again anticipating even better results. Both stocks skidded in afterhours trading, while a similar reaction to AMD’s earnings a day earlier contributed to Nasdaq’s losses on Wednesday, even as the Dow Jones closed at a new record high.

A 13.6% drop in SpaceX shares also weighed on the Nasdaq, but there were some major winners too, notably Nvidia, which has surged 9.2% this week. However, the chip and AI giant doesn’t report until August 26 and with the earnings schedule quietening down, the focus on Wall Street will likely switch back to Fed policy and geopolitics.

S&P 500 futures are slightly positive today after yesterday’s downside reversal from all-time highs.