Oil prices were little changed on Wednesday as investors evaluated the implications of renewed tensions between the United States and Iran, balancing weaker Chinese demand against continued drawdowns in global inventories.

In trading, Brent crude futures slipped 25 cents, or 0.23%, to $91.24 per barrel by 10:08 GMT, while US West Texas Intermediate crude fell 14 cents, or 0.16%, to $88.06 per barrel.

Prices had risen earlier in the session following the latest exchange of strikes between Washington and Tehran before retreating back toward previous closing levels.

Tamas Varga, analyst at PVM, said ongoing declines in global inventories continue to support prices, but weaker Chinese crude imports are limiting further upside, alongside continued restrictions on shipping activity through the Strait of Hormuz.

Varga added that it remains difficult to reconcile the current relative calm in oil markets with an ongoing conflict in one of the world’s most important energy-producing regions.

Geopolitical tensions restore the risk premium

US forces launched strikes against Iranian targets after President Donald Trump vowed on Tuesday to retaliate for the downing of a US Apache attack helicopter.

Priyanka Sachdeva, Senior Market Analyst at Phillip Nova, said the latest attacks have refocused traders on war-related risks and the potential for supply disruptions.

She added that the recent military exchanges have reintroduced a geopolitical risk premium into oil markets despite continuing diplomatic efforts.

Meanwhile, Tehran warned that it would resume hostilities if Israel continues its operations against the Iran-backed Hezbollah militia in Lebanon.

Israel’s refusal to end its campaign against Hezbollah has further complicated Trump’s efforts to transform the fragile ceasefire in the broader conflict involving the United States, Israel, and Iran into a lasting settlement.

Iran continues to disrupt much of the shipping traffic through the Strait of Hormuz, which normally carries around one-fifth of the world’s crude oil and liquefied natural gas supplies, while Washington maintains a blockade on Iranian ports.

US Energy Secretary said on Tuesday that vessel traffic in the Gulf and oil exports through the Strait are increasing, despite stalled negotiations between Washington and Tehran aimed at ending the conflict that has lasted for more than three months.

In the United States, data from the American Petroleum Institute, according to market sources, showed that US crude inventories declined for an eighth consecutive week last week. Gasoline inventories also fell, providing additional support for oil prices.

The US dollar was little changed on Wednesday as investors monitored the latest developments between the United States and Iran while awaiting key US inflation data that could provide important clues about the future path of Federal Reserve interest rates.

US forces launched strikes against Iranian targets after President Donald Trump vowed on Tuesday to respond to the downing of a US Apache attack helicopter, marking a new escalation that threatens the fragile ceasefire between Washington and Tehran.

Meanwhile, Iran’s Revolutionary Guard announced missile and drone attacks targeting US military bases in Jordan, Kuwait, and Bahrain in retaliation for US strikes on Iranian positions near the Strait of Hormuz.

The US Dollar Index, which measures the greenback against a basket of major currencies including the euro and the yen, edged slightly lower to 99.88.

The euro rose about 0.1% to $1.1553, while the British pound gained a similar amount to $1.3386.

Dominic Bunning, Head of G10 FX Strategy at Nomura, said markets still view the chances of a negotiated settlement between the United States and Iran as greater than the likelihood of a full-scale escalation, despite the renewed tensions in the short term.

Markets focused on Fed policy amid geopolitical risks

Bunning added that investors remain focused on US economic data and interest-rate expectations, particularly following the appointment of Kevin Warsh as Federal Reserve Chair.

He noted that markets may eventually need to move beyond the current wait-and-see approach, adding that many investors still believe the dollar could extend its strength if US economic data continues to show resilience.

US inflation and the Japanese yen in focus

Investors are awaiting the release of the US Consumer Price Index for May later on Wednesday, a report widely viewed as critical in assessing the likelihood of additional Federal Reserve rate hikes this year following last week’s stronger-than-expected jobs report.

Sho Suzuki, market analyst at Matsui Securities, said stronger US inflation would reinforce expectations for higher interest rates and provide additional support for the dollar.

Japanese yen

In Asia, the Japanese yen remained a key focus as markets have almost fully priced in a Bank of Japan rate hike at its June 16 meeting. As a result, the decision alone may not be enough to reverse the yen’s weakness unless it is accompanied by a more hawkish message from Governor Kazuo Ueda.

Tony Sycamore, market analyst at IG, said investors need clearer signals from Ueda that the next rate increase could be brought forward from December to September, with the possibility of a third hike before year-end, for the yen to stage a meaningful recovery.

He added that Japan’s Ministry of Finance may be forced to intervene again in the currency market if the yen continues to weaken.

The Japanese currency was little changed at 160.36 per dollar, remaining close to the 160 level that investors widely regard as a potential trigger point for official intervention.

A Reuters survey of economists showed expectations that the Bank of Japan will raise its benchmark interest rate this month and again in the fourth quarter, lifting borrowing costs to 1.25% by the end of the year as policymakers grow increasingly concerned about inflation risks.

Data released on Wednesday also showed that Japan’s wholesale inflation accelerated to a three-year high of 6.3% in May compared with a year earlier, driven by broader price pressures linked to the conflict in the Middle East.

Gold prices fell in European trading on Wednesday, extending losses for a fourth consecutive session and hitting their lowest level in three months, as heavy selling pressure continued across the metals market ahead of the release of the key US inflation report for May.

Those losses were partially limited by a weaker US dollar and lower oil prices following the cessation of military exchanges between the United States and Iran, which renewed hopes for a peace agreement that could bring an end to the conflict in the Middle East.

Price overview

• Gold prices today: Gold fell 2.3% to $4,161.56 per ounce, its lowest level since March 23, down from an opening level of $4,260.57. The session high also stood at $4,260.57.

• At Tuesday’s close, gold lost 1.6%, marking its third consecutive daily decline amid broad-based selling activity.

US dollar

The US Dollar Index slipped 0.15% on Wednesday, extending losses for a third straight session and reflecting continued weakness in the greenback against a basket of major and minor currencies.

A weaker dollar generally makes dollar-denominated gold more attractive to holders of other currencies.

In addition to ongoing profit-taking from the dollar’s recent two-month highs, the currency has come under pressure as optimism grows over the possibility of a final agreement that could end the conflict in the Middle East, particularly after military violations between the United States and Iran subsided.

Global oil prices

Oil prices declined more than 0.5% on Wednesday, extending losses for a second consecutive day after the US military announced the end of its defensive air operations in Iran, while Iran’s Revolutionary Guard halted attacks on US bases in Bahrain, Kuwait, and Jordan.

US interest rates

• Goldman Sachs expects the Federal Reserve to keep interest rates unchanged throughout 2026 and delay any rate cuts until 2027, citing stronger economic activity and continued job growth.

• According to the CME FedWatch Tool, markets are currently pricing a 69% probability of a Federal Reserve rate hike at the December meeting.

• Markets continue to price a 99% probability that rates will remain unchanged at the June meeting, while the probability of a 25-basis-point rate cut stands at just 1%.

• Investors are awaiting the release of the US May inflation report later today, which could lead to a significant repricing of interest-rate expectations.

Gold outlook

Market strategist Ilya Spivak said the primary driver behind gold’s weakness is the shift in Federal Reserve policy expectations, along with rising bond yields and a stronger dollar.

Spivak added that if gold breaks below the $4,100 level, the technical support structure could change dramatically, with $3,500 potentially becoming the next major support level by the end of the year.

SPDR Gold Trust

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, declined by 3.422 metric tons on Tuesday, bringing total holdings down to 1,016.50 metric tons, the lowest level since October 9, 2025.

The euro weakened in European trading on Wednesday against a basket of global currencies, resuming losses against the US dollar after a two-day recovery. The single currency moved lower once again toward a three-month low, pressured by escalating geopolitical tensions in the Middle East, particularly after the United States launched a new round of airstrikes against Iran.

Higher oil prices are renewing inflationary pressures on policymakers at the European Central Bank, strengthening expectations that the ECB could raise interest rates by 25 basis points at its June meeting, pending further economic data and confirmation of the inflation outlook.

Price action

• EUR/USD today: The euro fell about 0.1% against the dollar to $1.1532, compared with an opening level of $1.1543. The pair reached an intraday high of $1.1552.

• The euro ended Tuesday’s session up 0.1% against the dollar, marking its second consecutive daily gain as it continued recovering from a nearly three-month low of $1.1500.

US dollar

The US Dollar Index rose approximately 0.1% on Wednesday, resuming gains after a two-session pause and reflecting broader strength in the US currency against major global peers.

The advance was driven by renewed demand for the dollar as a safe-haven asset amid rising geopolitical tensions in the Middle East after the United States launched a fresh wave of airstrikes against Iran. Iran’s Revolutionary Guard subsequently announced attacks targeting the US Fifth Fleet in Bahrain and American military facilities in Kuwait and Jordan.

Oil prices

Global oil prices climbed more than 1% on Wednesday, rebounding from multi-week lows as concerns resurfaced over the continued closure of the Strait of Hormuz following the latest exchange of military strikes between the United States and Iran.

Latest developments in the Iran conflict

• The United States launched new airstrikes against Iran after an Apache helicopter was shot down.

• President Donald Trump said the response to the downing of the American helicopter should be “very strong.”

• US Central Command described the strikes on Iran as an act of “self-defense.”

• Iran announced retaliatory attacks against the US Fifth Fleet in Bahrain and military bases in Kuwait and Jordan.

• Despite the exchange of strikes, President Trump and Vice President JD Vance reiterated that negotiations toward a comprehensive nuclear agreement remain ongoing.

• Iranian Parliament Speaker Mohammad Bagher Ghalibaf stated that Tehran prefers a diplomatic solution to the crisis but also retains stronger alternatives if necessary.

European interest rates

• Money markets continue to price in a greater than 90% probability that the European Central Bank will raise interest rates by 25 basis points at its June meeting.

• Investors are awaiting additional eurozone data on inflation, employment, and wage growth to refine expectations regarding the ECB’s policy path.

• Sources speaking to Reuters indicated that an ECB rate hike in June remains highly likely, given inflation projections that are moving toward a less desirable scenario for policymakers.