Oil Opens Week with 2% Gap Higher - CPT Markets

Market Wrap-up: Oil and USD Rally on Middle East EscalationGeopolitical tensions reignited in the Middle East after the US military launched another round of airstrikes against Iran on 12 July, following strikes on 140 targets on Saturday, according to US Central Command (CENTCOM). The latest operation came in response to an attack by Iran's Islamic Revolutionary Guard Corps (IRGC) on a commercial container vessel transiting the Strait of Hormuz.

Iran retaliated on the same day with attacks targeting US military facilities in Jordan, Kuwait, Bahrain, and Oman. Iranian state media also announced that the IRGC had closed the Strait of Hormuz until further notice, although the US military rejected the claim.

Despite the conflicting statements, oil markets reacted aggressively. WTI opened the week with a gap of approximately 2.3% before extending gains by another 2% to around $74 per barrel, while Brent climbed 4.29% to $79.27 per barrel, reflecting heightened concerns that security risks around Hormuz remain elevated.

According to the International Energy Agency (IEA), renewed escalation between the US and Iran could disrupt expectations for a significant global oil surplus next year. Higher energy prices have also revived inflation concerns, reinforcing expectations that the Federal Reserve may maintain a tighter monetary policy stance for longer.

Spot gold fell nearly 1% to $4,071.09 per ounce, while the US Dollar Index (DXY) rallied sharply from around 100.60 to 101.20. The stronger dollar weighed not only on gold but also on most major currencies, pushing the euro, British pound, and Australian dollar to their weakest levels in nearly a week.

The Japanese yen also reversed Friday's gains, weakening back toward the 162.00 level against the US dollar. The renewed depreciation has revived concerns that Japanese authorities could step up intervention efforts should the currency continue to weaken.

Looking ahead for this week, markets will closely monitor several high-impact US events, including CPI, PPI, and, most notably, Federal Reserve Chair Kevin Warsh's congressional testimony. Together with ongoing geopolitical uncertainty in the Middle East, these events are expected to keep market volatility elevated throughout the week.

XAU/USD: Gold Falls as Oil Rally Lifts Fed Expectations 

Key takeaway:

Gold declined during the 10 July session as the sharp rise in oil prices, driven by renewed Middle East tensions, intensified inflation concerns and strengthened expectations that the Federal Reserve could maintain a tighter monetary policy stance.

Meanwhile, physical gold traded at a sizeable discount in India this week, while demand in China remained resilient after the country's central bank reported its largest increase in gold reserves in more than two and a half years during June.

Technical Outlook:

Daily Bias: Bearish

Support: 4,021

Resistance: 4,134

WTI: Oil Extends Rally on Hormuz Tensions 

Key takeaway:

WTI extended its rally after the US and Iran exchanged fresh airstrikes in an escalating confrontation over control of the Strait of Hormuz.

The latest strikes marked the fourth US attack on Iran within a week, following repeated assaults on commercial vessels transiting the southern shipping corridor protected by US forces.

President Donald Trump also stated during NBC News' Meet the Press interview on 12 July that the Strait of Hormuz remains open.

Meanwhile, Iranian state media maintained that the Islamic Revolutionary Guard Corps had closed the strategic waterway until further notice.

Technical Outlook:

Daily Bias: Bullish with Correction Risk

Support: 72.85

Resistance: 76.09

DXY: US Dollar Rallies on Safe-Haven Demand 

Key takeaway:

The US Dollar Index strengthened as renewed geopolitical tensions in the Middle East boosted safe-haven demand for the US dollar.

The greenback also drew additional support from higher oil prices, which reinforced inflation concerns and strengthened expectations that the Federal Reserve could raise interest rates again.

Market participants continue to price in one additional Fed rate hike before year-end.

Attention will also turn to Federal Reserve Chair Kevin Warsh, who is scheduled to deliver his first official testimony before the US Congress tomorrow.

Technical Outlook:

Daily Bias: Bullish

Support: 100.95

Resistance: 101.27

EUR/USD: Euro Slides as USD Regains Strength 

Key takeaway:

The euro weakened against the US dollar as escalating tensions between the US and Iran drove demand for the greenback.

Traders have also increased expectations that the European Central Bank (ECB) could resume policy tightening, as signs emerge that negotiations between Washington and Tehran aimed at ending the conflict are deteriorating.

The ECB raised interest rates at its June policy meeting, and markets expect two additional rate increases next year to contain the inflationary impact of higher energy prices stemming from the Iran conflict.

Technical Outlook:

Daily Bias: Cautiously Bullish

Support: 1.13914

Resistance: 1.14500

USD/JPY: U/J Climbs as Yen Weakens Again 

Key takeaway:

The Japanese yen weakened against the US dollar as escalating tensions with Iran and the wide US-Japan interest rate differential outweighed concerns over possible currency intervention.

The substantial yield gap continues to support carry trade flows, putting persistent downward pressure on the yen. Combined with broad-based US dollar strength, this further reinforced the advance in USD/JPY.

At the same time, traders remain highly alert to growing speculation that Japanese authorities could intervene again to support the domestic currency if depreciation accelerates.

Technical Outlook:

Daily Bias: Cautiously Bullish

Support: 161.89

Resistance: 162.71

Renewed geopolitical tensions in the Middle East are once again the dominant force driving global markets.

The sharp rally in oil has revived inflation concerns, reinforcing expectations that the Federal Reserve may need to maintain a tighter policy stance for longer. That combination has supported the US dollar, pressured gold, and weighed on most major currencies, while risk sentiment remains fragile despite safe-haven flows.

Market attention now shifts to this week's US CPI, PPI, and Federal Reserve Chair Kevin Warsh's congressional testimony. Together with developments in the Middle East, these events are likely to determine whether inflation expectations continue to build and whether the latest move in the US dollar and energy markets has further room to extend.

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