Gold, Dollar Rise on Hezbollah-Israel Confrontation | Economy

Escalating tensions between Israel and Hezbollah in Lebanon have sent oil prices soaring, with gold hitting a record high before falling at the time of writing.

Oil

Oil prices rose on Tuesday amid concerns that the exchange of fire between Israel and Hezbollah could affect supplies in the Middle East, as well as the possibility of a tropical storm affecting production in the United States, the world’s largest crude producer, later this week.

Brent crude futures rose 1.96 cents, or 2.30%, to $75.60 a barrel, while U.S. West Texas Intermediate crude futures rose 2.46% to $72.10, at the time of writing.

Both crudes closed lower yesterday amid concerns about demand.

The Israeli military said it launched air strikes on Hezbollah positions in Lebanon on Monday, killing 492 people and forcing tens of thousands to flee for safety, in the country’s deadliest day in decades, Lebanese authorities said.

Traders are also watching the weather, with the U.S. Gulf Coast facing the threat of a hurricane by the end of the week.

gold

Gold prices rose to a new record high today, driven by rising tensions in the Middle East, comments from Federal Reserve officials reflecting a tendency towards further easing of monetary policy, and due to the escalation.

Gold rose to a record high of $2,640 an ounce before retreating to $2,626 at the time of writing.

Gold hit an all-time high on Monday.

US gold futures rose to $2,661.60 an ounce, before retreating to $2,650.

Chicago Fed President Austin Goolsbee said yesterday he expected “many more rate cuts over the next 12 months” as the Fed seeks a “soft landing” for the economy, controlling inflation without collapsing the labor market.

Comments from U.S. policymakers are being closely watched after the Federal Reserve’s decision last week to cut interest rates by half a percentage point.

Other Fed speakers on Monday, including Atlanta Fed President Raphael Boucek and Minneapolis Fed President Neel Kashkari, justified the central bank’s big move on interest rates.

“The opening of a new war front in the Middle East between Israel and Hezbollah has also led to some safe-haven buying of gold in an attempt to hedge against the geopolitical risks of any wider regional war,” said IG market strategist Yip Jun Rong.

“The escalation of tensions in the region is likely to continue for a longer period, which may lead to gold prices remaining on an upward path,” he added.

The Israeli army launched air strikes on Hezbollah sites in Lebanon on Monday, killing 492 people and forcing tens of thousands to flee in the country’s bloodiest day in decades.