Oil Tops $83; Inflation Risks Return - CPT Markets

Market Wrap-up: US-Iran Tensions Lift Oil, Fuel Inflation ConcernsTensions between the United States and Iran intensified further after Iran launched a new wave of ballistic missile and one-way drone attacks targeting sites across Bahrain, Jordan, Kuwait, and Iraq.

The US military reported that three service members were killed over the past two days and carried out its ninth consecutive night of strikes against Iranian targets. In response, Iranian officials declared that the ceasefire between the two countries had been abandoned, raising the risk of deeper disruptions to critical regional energy supply routes.

Crude oil opened with a bullish gap above $83 per barrel in Monday's Asian session and has now gained roughly 20% in July alone.

The sharp surge in energy prices has revived concerns that global inflation could reaccelerate, potentially forcing major central banks, including the US Federal Reserve, to maintain a more hawkish policy stance.

Despite these developments, the US Dollar Index (DXY) remained steady around 100.80 as investors awaited further geopolitical developments. According to the CME FedWatch Tool, traders continue to price in at least one additional Fed rate hike in 2026, reinforcing the constructive outlook for the US dollar and suggesting downside risks for the greenback remain limited.

Gold, meanwhile, ended last week around 3% lower, marking its steepest weekly decline since early June. Rising inflation concerns and higher bond yield expectations continued to outweigh safe-haven demand, limiting bullion's upside despite escalating geopolitical tensions.

Away from geopolitics, preliminary data from the University of Michigan showed US consumer sentiment improved in early July as households became more optimistic about current conditions and the broader economic outlook.

The Consumer Sentiment Index rose to 54.4 from 49.5, beating economists' expectations and pointing to improving public confidence.

Inflation expectations, however, delivered a mixed picture. One-year expectations eased to 4.2% from 4.6%, while the five-year outlook remained unchanged at 3.3%, suggesting consumers see price pressures gradually moderating in line with recent inflation data.

Looking ahead for this week, traders will focus on the European Central Bank's interest rate decision, UK inflation and labour market data, and preliminary global PMI releases.

XAU/USD: Gold Faces Pressure as Oil Rally Revives Fed Rate Hike Expectations 

Key takeaway:

Gold rebounded during the 17 July session but remained on track for its worst weekly decline in six weeks as escalating US-Iran tensions drove oil prices sharply higher, reigniting inflation concerns and reinforcing expectations that the Federal Reserve could continue raising interest rates.

The rally in crude oil has increased the risk of renewed inflationary pressure, strengthening the case for further Fed tightening.

Dallas Fed President Lorie Logan also became the first senior official under Fed Chair Kevin Warsh's new leadership team to publicly advocate another rate hike, adding further support to the higher for longer narrative.

Technical Outlook:

Daily Bias: Cautiously Bullish

Support: 3,982

Resistance: 4,021

Oil: WTI Extends Rally on Middle East Supply Risks 

Key takeaway:

WTI crude surged during the 17 July session after Kuwait accused Iran of attacking a power generation and desalination facility, further escalating tensions across the Persian Gulf.

Iran stated that it had launched attacks against US-linked targets in Bahrain, Jordan, Kuwait, Oman, Qatar, and Syria in retaliation for Washington's latest airstrikes.

Meanwhile, on 19 July, US Energy Secretary Chris Wright sought to calm market concerns that renewed US-Iran hostilities could once again lead to the closure of the Strait of Hormuz and trigger another sharp spike in global energy prices.

Technical Outlook:

Daily Bias: Bullish with Correction Risk

Support: 78.81

Resistance: 85.00

DXY: US Dollar Holds Firm on Fed Rate Expectations 

Key takeaway:

The US Dollar Index remained broadly stable despite escalating tensions with Iran as investors waited for further geopolitical developments before extending directional positioning.

According to the CME FedWatch Tool, markets continue to price in at least one additional Fed rate hike in 2026, providing underlying support for the US dollar.

On the data front, stronger consumer sentiment offset softer one-year inflation expectations, suggesting confidence is improving even as households perceive inflation pressures to be gradually easing.

Technical Outlook:

Daily Bias: Cautiously Bearish

Support: 100.50

Resistance: 100.95

EUR/USD: Stays Under Pressure Before ECB Meeting 

Key takeaway:

EUR/USD remained under pressure for a third consecutive session as escalating US-Iran tensions supported the US dollar through expectations of a more hawkish Federal Reserve.

Attention this week will shift to Thursday's European Central Bank meeting, which is expected to be the key catalyst for the common currency.

The ECB is widely expected to leave the Main Refinancing Rate unchanged at 2.40% and the Deposit Facility Rate at 2.25%.

Technical Outlook:

Daily Bias: Cautiously Bearish

Support: 1.14060

Resistance: 1.14729

USD/JPY: Near Four-Decade High Despite Intervention Risks 

Key takeaway:

The Japanese yen continued to trade near a four-decade low as its broader downtrend persisted, although downside momentum remained cautious amid intervention risks.

Japanese Finance Minister Satsuki Katayama said on Friday that the government stands ready to take decisive action whenever necessary, maintaining verbal pressure against excessive currency weakness.

At the same time, economic risks stemming from the Middle East conflict continued to weigh on the yen. Combined with modest US dollar strength, this continued to provide support for USD/JPY.

Technical Outlook:

Daily Bias: Bearish with Rebound Potential

Support: 162.13

Resistance: 162.55

Escalating US-Iran tensions remain the dominant macro driver, with the sharp rally in oil prices reshaping inflation expectations across global markets.

Higher energy costs have reinforced the view that central banks, particularly the Federal Reserve, may need to maintain a hawkish stance for longer, helping keep the US dollar resilient even as investors await further geopolitical developments.

Gold has struggled against rising inflation and rate expectations despite elevated geopolitical risks, while EUR/USD remains pressured by broad USD strength.

Oil continues to lead cross-asset price action, with traders closely monitoring whether supply disruptions intensify further.

Attention now shifts to this week's ECB policy decision, UK inflation and labour market data, and preliminary global PMI releases, which will provide the next catalysts for FX and broader risk sentiment.

If you are looking for a platform to take advantage of market volatility, CPT Markets is a compelling choice. Trade global markets on advanced trading platforms with competitive spreads, fast execution, and a seamless experience across all devices.

Whether you are a beginner or an experienced trader, trading short-term or long-term, the right platform can make the difference - Trade smarter with CPT Markets!

This content is provided for informational purposes only and does not constitute investment advice, investment recommendations, or an offer or solicitation to buy or sell any financial instrument. Trading financial products such as Forex and CFDs involves a high level of risk and may not be suitable for all investors. You may lose all of your invested capital, and in certain circumstances, losses may exceed your initial deposit. Please ensure that you fully understand the risks involved and carefully consider your financial objectives, level of experience, and financial situation before trading.