Oil prices fell on Thursday amid concerns over the possible reinstatement of US tariffs, raising fears about global demand ahead of an expected supply increase from major producers.

Brent crude futures dropped 58 cents, or 0.8%, to \$68.53 per barrel by 09:42 GMT. US West Texas Intermediate (WTI) crude fell 57 cents, or 0.9%, to \$66.88 per barrel.

Both benchmarks had reached their highest levels in a week on Wednesday after Iran announced it was suspending cooperation with the International Atomic Energy Agency, sparking fears that the ongoing dispute over its nuclear program could escalate into armed conflict.

Prices were also temporarily supported by a preliminary trade agreement between the US and Vietnam, boosting market sentiment.

However, uncertainty around tariffs continues to weigh on markets. The 90-day temporary freeze on higher US tariffs is set to expire on July 9, while trade negotiations with several major partners, including the European Union and Japan, remain unresolved.

Meanwhile, OPEC+ — the Organization of the Petroleum Exporting Countries and its allies led by Russia — is expected to agree on a production increase of 411,000 barrels per day at its meeting later this week.

Market pessimism deepened following a private survey showing a slowdown in China’s services sector activity in June — the largest oil importer worldwide — recording the weakest growth pace in nine months due to reduced demand and shrinking new export orders.

In the US, unexpected crude inventory data added to demand concerns in the world’s largest oil consumer.

The US Energy Information Administration reported on Wednesday that commercial crude stockpiles rose by 3.8 million barrels to 419 million barrels last week, while analysts polled by Reuters had expected a decline of 1.8 million barrels.

Analysts say markets will also be closely watching today’s US monthly jobs report, which is likely to influence expectations about the timing and scale of Federal Reserve interest rate cuts in the second half of the year.

Interest rate cuts could stimulate economic activity, which in turn might increase oil demand.

The dollar remained near its lowest level in three and a half years this week on Thursday morning ahead of the much-anticipated US jobs report, while a trade deal between the United States and Vietnam boosted expectations for similar agreements before the US tariffs take effect on July 9.

Sterling rose slightly after falling nearly 1% on Wednesday, following a statement from the UK Prime Minister’s office affirming Keir Starmer’s support for Finance Minister Rachel Reeves amid rumors of her potential dismissal over investor concerns about the UK’s financial situation.

UK government bond prices stabilized after a sharp sell-off on Wednesday, triggered by Reeves’ emotional appearance in Parliament and the government’s retreat on social care reforms due to party pressure.

The pound rose 0.2% to $1.3665, while the euro remained nearly unchanged at $1.180, close to its highest level since September 2021 recorded earlier this week. The Japanese yen edged down slightly to 143.80 yen against the dollar.

Carol Kong, currency strategist at Commonwealth Bank of Australia, said markets are worried about Reeves being replaced by someone less committed to fiscal rules and more willing to increase borrowing.

She added, “The pound may remain under downward pressure unless the UK government takes steps to restore market confidence in its public finances.”

The US Dollar Index, which measures the currency against a basket of six major currencies, held steady at 96.748, close to its lowest levels in over three and a half years, and is on track for a weekly loss of 0.5%.

The US Jobs Report

Attention turns to the US Department of Labor’s comprehensive June jobs report expected later today, forecasted to show the unemployment rate rising to 4.3%, the highest in over three and a half years, according to a Reuters poll.

A special report released Wednesday painted a bleak picture of the labor market, prompting traders to adjust expectations on the timing of Fed rate cuts. LSEG data showed markets are now pricing a 25% chance of a July rate cut, up from 19% the day before.

Max McKinney, global markets strategist at JPMorgan Asset Management, said, “Today’s data will again highlight growth concerns and likely increase pressure on the Fed to speed up rate cuts.”

He added, “With inflation remaining well above target more than unemployment, the Fed should hold its stance. One weak labor report alone shouldn’t be enough to change policy.”

Pending Trade Deals

Ahead of the July 9 tariff deadline, US President Donald Trump announced a trade agreement with Vietnam and suggested similar deals could be reached with other countries.

Despite limited details, Trump said Vietnamese exports will face a 20% tariff, while a 40% tariff will apply to goods transiting through Vietnam from third countries, aiming to prevent “trade circumvention.”

The Vietnamese dong hit an all-time low, with UBS analysts expecting the central bank to allow a gradual currency depreciation to ease the tariff impact on exporters.

Meanwhile, talks with other countries proceed slowly. Japan expressed reservations over certain terms citing “national interest,” while South Korean President Lee Jae-myung said negotiations with the US are not going smoothly and he cannot confirm if a deal will be reached before the July 9 deadline.

Meanwhile, US House Republicans voted in favor of a procedural step allowing discussion of Trump’s massive tax and spending bill, paving the way for a final vote. The bill is expected to add \$3.3 trillion to the rising national debt, raising global bond market concerns about government deficits, not only in the US but also in major economies like Japan.

Gold prices fell in European trading on Thursday for the first time in four sessions, retreating from a one-week high amid profit-taking and technical correction activity. The decline came under pressure from the continued recovery of the US dollar in foreign exchange markets.

The dollar remains on an upward path, rebounding from its lowest levels in over three years as investors resumed buying from lower levels ahead of the US jobs report for June, due later today, before the July 4 holiday.

The Federal Reserve relies heavily on such data to guide its monetary policy decisions, and the outcome is likely to influence current expectations around potential rate cuts this year.

Price Overview

Gold prices fell by 0.45% to $3,342.03, down from the session’s opening level of $3,357.58, after hitting a one-week high of $3,365.76 earlier in the session.

On Wednesday, gold rose 0.6% at settlement, notching a third consecutive daily gain following weak US private payrolls data.

US Dollar

The US dollar index rose 0.15% on Thursday, marking its second straight daily gain as it continued to recover from a three-year low at 96.38 points, reflecting broader strength across major and minor currency pairs.

Beyond technical buying, the dollar was supported by optimism surrounding a trade deal between the United States and Vietnam ahead of the July 9 tariff deadline.

President Donald Trump announced on Wednesday that Vietnam had reached a trade agreement with the US, a move he said could prompt other countries to follow suit.

Though details remain limited, Trump said Vietnamese goods would face a 20% tariff, while transshipped goods from third countries through Vietnam would be subject to a 40% tariff.

Chhanana of Saxo Bank said it’s now important to monitor China’s response, given that the move directly targets goods rerouted via Vietnam. He added this signals a clear restructuring of global supply chains, with further disruption likely.

US Interest Rates

Fed Chair Jerome Powell said tariffs have shifted the Fed’s outlook on the timing of future rate changes.

Data released Wednesday showed that US companies shed jobs in June for the first time since January 2022, prompting traders to adjust their expectations for a Fed rate cut.

According to the CME FedWatch Tool, the probability of a 25-basis-point rate cut at the July meeting rose from 20% to 25%, while the likelihood of no change fell from 80% to 75%.

Expectations for a September rate cut also rose from 93% to 95%, while odds of rates staying unchanged dropped from 7% to 5%.

US Jobs Report

Markets are now looking to today’s official monthly jobs report from the US Labor Department, which will include key figures such as non-farm payroll additions, unemployment rate, and average hourly earnings.

At 13:30 GMT, non-farm payroll data is expected to show the US economy added 111,000 jobs in June, down from 139,000 in May. The unemployment rate is forecast to rise to 4.3% from 4.2%, while average hourly earnings are seen increasing by 0.3%, down from the previous 0.4% rise.

Gold Outlook

Kelvin Wong, market analyst for Asia-Pacific at OANDA, said gold appears to be consolidating between $3,320 and $3,360 as the market adopts a wait-and-see approach ahead of the NFP data and ISM Services PMI, rather than entering large positions.

Wong added that the Vietnam trade deal has likely already been priced in, and the market’s main focus now is on unresolved agreements with larger economies.

SPDR Gold Trust

Holdings in the SPDR Gold Trust, the world’s largest gold-backed ETF, fell by 0.57 metric tons on Wednesday, marking a third straight daily decline. Total holdings now stand at 947.66 metric tons, the lowest level since June 18.

The euro declined in European markets on Thursday against a basket of global currencies, extending losses for the second consecutive session against the US dollar. The euro moved further away from its highest level in four years, pressured by continued profit-taking and corrective movement.

The US dollar continued to recover from its lowest levels in more than three years, supported by bargain hunting and ahead of the June jobs report due later today, before the Independence Day holiday in the United States.

This week’s key inflation data from Europe has increased uncertainty surrounding a possible interest rate cut by the European Central Bank in July, as investors await more economic indicators from the eurozone.

Price Outlook

The euro fell against the dollar by 0.1% to $1.1786, down from the day’s opening price of $1.1798, after reaching a high of $1.1810.

The euro closed Wednesday down 0.1% against the dollar, marking its first daily loss in ten sessions, as traders booked profits from the four-year high of $1.1830.

The US Dollar

The US Dollar Index rose by 0.15% on Thursday, extending gains for a second straight session, as the greenback continued to rebound from its three-year low of 96.38. The move reflected ongoing strength in the dollar against major and minor currencies.

In addition to bargain buying, the dollar was buoyed by optimism following a new trade agreement between the United States and Vietnam, which renewed hopes for more deals ahead of the July 9 tariff deadline.

President Donald Trump announced Wednesday that Vietnam had signed a trade agreement with the US, and suggested that other nations might follow suit.

Despite limited details, Trump stated that Vietnamese goods would face a 20% tariff, while goods transshipped through Vietnam from third countries would be subject to a 40% tariff.

Chinana from Saxo Bank noted that all eyes are now on China’s response, as the move directly targets transshipped goods with a higher tariff. He added that this is a clear sign of global supply chains being restructured and warned of potential further disruptions ahead.

US Jobs

Global financial markets are closely watching the US Labor Department’s June employment report, scheduled for release on Thursday ahead of the July 4th holiday.

Data released on Wednesday showed that US companies shed jobs in June for the first time since January 2022, prompting traders to adjust expectations for the timing of a potential Fed rate cut.

According to CME Group’s FedWatch tool, the probability of a 25-basis-point rate cut at the July meeting rose from 20% to 25%, while the likelihood of holding rates steady declined from 80% to 75%.

European Interest Rates

The overall Consumer Price Index in Europe rose by 2.0% year-on-year in June, matching market expectations, after a 1.9% increase in May.

According to Reuters sources, a clear majority at the latest European Central Bank meeting favored keeping rates unchanged in July, with some members calling for a longer pause.

Money markets currently price in a 30% chance of a 25-basis-point rate cut by the ECB in July.