Brent at $117.64: how oil is feeding the Fed hike fears
In short
- Brent crude settled at $117.64 a barrel on Friday and WTI at $104.12, the highest settlements since late April, after another tanker attack in the Strait of Hormuz. Brent rose 13.6% in October and WTI 15.2% (Kitco).
- Kitco says higher energy prices strengthen expectations of a restrictive Fed. The Fed held at 3.75–4.00% on 28 October with two officials favouring a hike; headline PCE inflation is 3.6% and core 3.1%.
- Gold fell about 3.5% on Friday even though Treasury yields fell. A barrel of Brent is about £87.80 at today’s rates.
Oil is the new variable in the inflation story: Brent closed on Friday at $117.64, its highest settlement since late April, and Kitco links it to expectations of a tougher Fed. On Friday we wrote about gold falling below $4,000; Kitco’s report that day tied the drop to the Hormuz attack lifting oil.
What happened
Kitco reports that another tanker attack in the Strait of Hormuz pushed crude higher on Friday. December Brent settled at $117.64 and WTI at $104.12, both the highest settlements since late April. Over October, Brent gained 13.6% and WTI 15.2%. US–Iran negotiations over sanctions and Hormuz shipping security remain unresolved, Kitco notes.
Why it matters for rates: Kitco writes that higher energy prices strengthen expectations of a restrictive Fed. The central bank held at 3.75–4.00% on 28 October with two officials wanting a hike, and futures point to further tightening in December. The data are already firm: third-quarter US GDP grew 3.4% annualised, September core PCE was 3.1% and headline PCE 3.6%.
Gold fell about 3.5% to around $3,880 an ounce and silver 6.1% to about $49 (Kitco’s late-US-trading figures) as a tech-led equity selloff drove liquidation across precious metals. The 10-year Treasury yield fell toward 4.93%, which would normally support gold, Kitco notes, but did not offset the selling.
In Europe, the next readings are euro-zone flash inflation on Wednesday 4 November (September was 3.8%, core 2.5%; the ECB held at 2.5% on 29 October) and the Bank of England on Thursday, which is expected to raise Bank Rate by 0.25 points from 3.75% – see our week ahead in Europe. Energy is one input to those figures; oil’s effect on the October reading will not be clear until Wednesday.
What it means for you
The maths: a barrel of Brent at $117.64 is about £87.80 at today’s rate of £0.7463 to the dollar, and WTI at $104.12 about £77.71. A 10% move in Brent is about $11.76, or £8.78, a barrel. Brent is $13.52 above WTI.
£1,000 of gold at the spot price shrank to about £961 on Friday: an ounce fell from £3,027 on 29 October to £2,910 on 30 October (−3.88%, our data). Spot excludes the premium you pay on a bar or coin.
Live prices: gold prices and the stock market.
Bottom line
Brent ended October up 13.6% at $117.64 after a new Hormuz attack, and Kitco ties higher energy prices to expectations of a tougher Fed, which held at 3.75–4.00% and may raise rates in December. Gold fell about 3.5% on Friday.
Sources: Kitco – PM report · Kitco – AM report
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For information only. This is not investment advice.
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