Author: Anne Sinclair
Strait of Hormuz Oil Price: Gold and Brent in Focus
The Strait of Hormuz oil price story drove markets last week, even without a major data release behind it. Brent crude eased as Saudi export routes showed signs of recovery. Meanwhile, gold edged higher as the inflation outlook softened. As a result, unscheduled political headlines are currently moving these two markets more than the economic calendar.
Strait of Hormuz Oil Price and Gold: Market Snapshot
How far did Brent crude and gold move last week?
Brent crude fell 1.6 percent to about 103.17 dollars on Friday 18 September, while gold hit a one week high near 4,380 dollars. Both figures come from Reuters and Trading Economics. US West Texas Intermediate slipped 0.6 percent to 101.30 dollars. Brent also posted its first weekly loss in three weeks.
That decline followed a four month high near 106 dollars on Tuesday 15 September. In contrast, gold posted its first weekly gain in four weeks. However, a firmer US dollar capped the metal's advance.
Why are oil and gold moving in opposite directions?
Oil and gold are moving in opposite directions because one political input reaches them through different channels. Supply risk in the Gulf sets the crude price first. In turn, the crude price shapes the inflation outlook. That outlook then drives rate expectations, which set the dollar and the cost of holding gold.
Crude prices and the inflation outlook
When crude rallies on supply fear, inflation expectations usually rise with it. Consequently, central banks lean toward tighter policy, which tends to weigh on a non yielding asset such as gold. When crude falls back, that pressure eases. Last week, the Strait of Hormuz oil price pullback gave gold some room to recover.
The Fed rate hike and a firmer dollar
The US Federal Reserve raised rates by 25 basis points on Wednesday 16 September. It also signalled that further increases remain possible. Markets priced close to a 60 percent chance of another rise next month. Similarly, the Bank of Japan lifted its policy rate to a 31 year high. Together, these moves supported the dollar and limited gold's gains.
Trump's UN Address and the US Iran Talks Track
UN General Assembly week and the wider diplomatic calendar
President Donald Trump is scheduled to address the United Nations General Assembly in New York this week. According to Fox News, he is expected to argue that Iran should not be allowed to obtain a nuclear weapon. In addition, a meeting between Trump and Chinese President Xi Jinping is expected in the coming week.
Diplomatic contact also picked up. On Sunday 20 September, Egypt's President el-Sisi met CIA Director John Ratcliffe to discuss an Iran agreement and freedom of navigation, his office said. Earlier, on Wednesday 16 September, Chinese Foreign Minister Wang Yi met Iranian Foreign Minister Abbas Araghchi in Beijing. Wang said China was prepared to play a constructive role and urged both sides to rebuild their negotiating mechanism, Iran International reported.
How does diplomacy feed the Brent crude price?
Diplomacy feeds the Brent crude price by changing how much supply risk traders build into each barrel. None of these events sits on an economic calendar. A single speech or leaders meeting can move the Strait of Hormuz oil price within minutes. Moreover, these headlines often land outside scheduled release windows.
A physical market premium signals tightness
Physical crude is signalling more tightness than futures reflect. Energy Intelligence reported on Tuesday 15 September that physical Brent cargoes traded more than 20 dollars a barrel above the front month futures contract. In other words, the headline Strait of Hormuz oil price in futures understates what physical buyers were paying.
Escalation and de-escalation paths
During this conflict, signs of a negotiated settlement have tended to compress the crude risk premium and cool safe haven demand for gold. By contrast, signs of renewed military action have tended to do the opposite. Both paths remain open.
Saudi Pipeline Outage and the 30 September Iraq Deadline
Iran's stated position on reopening Hormuz
Iranian parliament speaker Mohammad Bagher Ghalibaf said the strait will stay closed until Tehran's conditions are met, Iran International reported on Sunday 20 September. He also said Iran must both fight and negotiate. Meanwhile, a planned regional meeting between Iran and Gulf states in Oman was postponed earlier this month.
Why does the Iraq deadline matter for oil supply?
The Iraq deadline matters because the attack that shut Saudi Arabia's main Hormuz bypass came from Iraqi territory. According to CNBC, drones launched from Iraq hit the East West pipeline on 11 September. Separately, Al Arabiya reported that Iran is pressing Iraqi armed factions to keep their weapons. Those talks come ahead of a 30 September deadline for ending the US led coalition mission in Iraq.
East West pipeline restart timeline
The East West pipeline runs roughly 750 miles to the Red Sea port of Yanbu. Its design capacity of about 7 million barrels a day lets Saudi crude bypass the strait. Bloomberg reported that Saudi Aramco aims to partially restart the line within days and reach full capacity within about six weeks. In the meantime, Saudi Arabia has raised shipments through Oman. Refined product inventories have also risen in the United States, Singapore and Europe.
Key dates for oil and gold price news this week
Several markers stand out. First, traders are following the UN General Assembly week and any confirmed Trump and Xi meeting. Second, they are watching for confirmation of the Aramco pipeline restart. Third, the 30 September Iraq deadline falls at month end. Russia is also reportedly extending its diesel export ban, which affects refined fuel rather than crude.
Two scenarios for crude and gold
Two broad scenarios are visible, and neither is more likely on current information. In the first, the pipeline restart proceeds and diplomacy continues through Chinese, Omani and Egyptian channels. As a result, the crude risk premium could narrow. In the second, talks stall and attacks on export infrastructure resume. In that case, traders could reprice supply risk higher.
Developments that would change the picture
A confirmed reopening of the strait would mark a material change. So would a formal restart of US and Iran negotiations or a completed Aramco repair. On the other side, a fresh strike on Gulf export infrastructure or a breakdown around the Iraq deadline would also shift conditions. For gold, the reaction would depend on whether the dollar moves with the Strait of Hormuz oil price or against it.
Key takeaways for oil and gold this week
The Strait of Hormuz oil price eased last week as Saudi Arabia moved to restart its East West pipeline. Gold rose as inflation concerns cooled. In the days ahead, the UN address, the diplomatic track and the 30 September Iraq deadline are the main political markers for both markets.
For background on the strait's role in global oil transit, see the International Energy Agency's Strait of Hormuz oil security briefing. For this week's scheduled releases, read our weekly economic calendar.
Following Oil and Gold With Lirunex
Track Brent crude and XAU/USD alongside the week's scheduled releases on the Lirunex economic calendar, or practise on a demo account to see how geopolitical headlines move prices without risking capital. If you have questions about how oil and gold CFDs work, our support team can help.
[ Open a Demo Account ] [ Lirunex Economic Calendar ] [ Contact Support ]
Risk Disclaimer: Forex and CFD trading involves significant risk of loss and may not be suitable for all investors. Past performance is not indicative of future results. Please ensure you fully understand the risks involved before trading.
