Commodity markets are under pressure from the US dollar growth. New geopolitical risks in the Middle East are on the agenda

Friday’s dollar strength pressured commodity markets. WTI crude oil fell below $81 per barrel. Nevertheless, the market remains supported by geopolitical risks in the Middle East as Israeli forces moved further into the Gaza Strip and Yemeni Houthis carried out another attack on a ship in the Arabian Sea on June 24. Meanwhile, Israel and Lebanon’s Hezbollah stand on the brink of a new conflict. Ecuador’s state oil company, Petroecuador, also declared force majeure on some Napo heavy oil shipments due to the shutdown of a major pipeline and oil wells amid heavy rains. In addition, recent data points to a decline in US crude oil inventories amid a rebound in energy consumption.

Asian markets were predominantly up last week. Japan’s Nikkei 225 (JP225) gained 0.40%, China’s FTSE China A50 (CHA50) fell by 1.22%, Hong Kong’s Hang Seng (HK50) gained 1.01%, and Australia’s ASX 200 (AU200) was positive 0.93%. Asian stock markets opened lower on Monday, reeling from weakness on Wall Street, as shares of Nvidia and other artificial intelligence chip makers saw heavy selling after strong gains.

Singapore’s annual inflation rate for May 2024 rose to 3.1%, exceeding market forecasts of 3.0% and accelerating from April’s 2-year low of 2.7%. The annualized core inflation rate unexpectedly came in at 3.1%, the same as in the previous two months, beating the consensus forecast of 3.0%. Monthly, CPI rose by 0.7%, the highest since February, after rising 0.1% in April.

The Australian dollar weakened below $0.665, extending recent losses as the US dollar rose on strong US business activity data that dampened expectations of an interest rate cut by the Federal Reserve. Investors are also cautiously awaiting Australian inflation data this week after the country’s central bank said it discussed the need for a rate hike at its June meeting and did not consider the case for a rate cut.