Gold prices edge lower; heading for weekly losses ahead of U.S.-Russia talks
Investing.com - A flare-up in violence between Israel and Iran presents global markets and central banks already grappling with trade uncertainties with a fresh risk factor, according to analysts at Barclays (LON:BARC).
In a note to clients, the brokerage flagged that the conflict could stoke a spike in inflation through higher oil prices and weigh on broader consumption and investment.
Israel and Iran continued to exchange missile strikes over the weekend, and into Monday, ramping up the geopolitical uncertainty in the Middle East.
Tehran has told mediators Oman and Qatar that it will not engage in ceasefire talks helmed by the U.S. while Israel is carrying out its strikes, Reuters has reported, citing an official briefed on the matter.
Israel, meanwhile, has warned Iranians living near nuclear facilities to evacuate. The country targeted these locations and other ballistic missile programs in a wave of attacks first launched early on Friday.
Oil prices were choppy on Monday. By 05:25 ET, Brent crude futures had dropped by 0.7% to $73.69 per barrel, while U.S. West Texas Intermediate crude futures fell 0.6% to $70.85 a barrel.
Both of the contracts had soared by over $4 earlier in the session, and surged immediately after Israel’s initial strike on Friday.
If sustained, last week’s jump in oil prices would lift Barclays’ fourth quarter-to-fourth quarter headline forecast for U.S. consumer price growth by around 0.1 percentage point, the analysts said.
"[T]he risks are still skewed towards further oil price increases. So far, these attacks have had no effect on oil market fundamentals, but the risk of that eventuality has increased," the Barclays analysts said.
They added that although a separate potential driver of inflation -- U.S. President Donald Trump’s punishing tariff agenda -- has yet to appear in price data, "we hesitate to extrapolate much from this."
"Most importantly, evidence continues to suggest that cost-push pressures from tariffs will eventually feed through to goods prices," the analysts wrote.
Despite the impact of the tariffs taking a relatively slow period of time to emerge, they flagged that fresh policy threats from Trump or renewed geopoltical risks could happen rapidly -- and possibly spark steep swings in the U.S. dollar, oil, and gold.