Risk-On Unravels: Iran Tensions and Rate-Hike Fears Grip Markets

Crude oil has jumped nearly 9% this week to trade around $91 per barrel, marking its strongest weekly performance since mid-July as renewed US-Iran strikes reignited supply-disruption concerns. Diesel prices have hit all-time highs as conflicts in Ukraine and Iran knock out refineries, amplifying inflationary pressures across global supply chains. The hourly chart shows WTI testing resistance near the 90.13 level after a sharp rally from the mid-August lows around 79.87. Meanwhile, the S&P 500 (consolidating near 7,718) and DAX 40 (hovering around 26,048) both slid on Friday as a hotter-than-expected August payrolls print—162,000 jobs versus 53,000 expected—increased bets that the Federal Reserve could raise rates at its September meeting. Swap markets now price over 50% probability of a September hike, putting pressure on rate-sensitive assets.

Gold tumbled 2% to around $4,380 on Friday as the strengthening dollar and tighter-policy expectations dragged the metal lower, with money markets pricing near 60% probability of a Fed hike. The XAU/USD chart reveals a break below the $4,400 support zone after testing highs near $4,507 earlier in the week. EUR/USD has drifted lower toward 1.1610 from the 1.1700 area, reflecting broad dollar strength and diverging policy expectations between the ECB and Fed. Investors remain focused on the interest-rate outlook while geopolitical tensions in the Middle East persist, with the ECB expected to raise rates by 25 basis points next week. Next week's US inflation data will be pivotal in shaping the Fed's September decision, with markets bracing for volatility amid escalating energy prices and evolving rate expectations.