Oil Prices Edge Higher Amid Rate Cut Hopes and Geopolitical Tensions

Oil prices rose on Thursday, bolstered by optimism that potential U.S. interest rate cuts could stimulate economic activity and increase fuel consumption. However, concerns over sluggish global demand limited the gains.

By 0348 GMT, Brent crude futures were up 17 cents, or 0.21%, at $79.93 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 21 cents, or 0.27%, to $77.19 per barrel. This recovery followed a more than 1% decline on Wednesday due to an unexpected rise in U.S. crude inventories and reduced concerns about an escalating Middle East conflict.

U.S. consumer prices increased moderately in July, with the annual inflation rate dropping below 3% for the first time in nearly three and a half years, reinforcing expectations that the Federal Reserve might cut interest rates next month.

“We saw a correction in Asia trade as the oil market was oversold on Wednesday,” said Yuki Takashima, an economist at Nomura Securities. Takashima noted that investors are betting on a possible rate cut by the Fed in the coming month, although ongoing concerns about global demand, particularly in China, could keep oil prices under pressure.

Investor concerns were further heightened by the potential for Iran to retaliate against Israel following the killing of a Hamas leader last month. Three senior Iranian officials indicated that only a ceasefire agreement in Gaza would prevent Iran from responding directly.