Oil Climbs Above $114 as Houthi Attack Fuels Middle East Supply Fears, Gold Slips...

Oil prices rose on Wednesday as an attack claimed by Yemen's Iran-backed Houthi movement on Saudi Arabia's Ras Tanura refinery heightened fears of a prolonged Middle East conflict, reinforcing concerns that disruptions to energy supplies could sustain inflation and complicate the Federal Reserve's interest-rate outlook.

Brent crude futures gained 0.7% to $114.68 a barrel, while US West Texas Intermediate crude rose 1.42% to $101.32. The gains came as investors assessed the risk of further attacks on energy infrastructure and the possibility that the conflict involving Iran could widen before a diplomatic settlement is reached.

The Houthis said on Tuesday that they had attacked Ras Tanura, Saudi Arabia's largest refinery, with a ballistic missile. The claim added to concerns about the vulnerability of critical energy facilities in a region central to global oil production and exports. The immediate market concern extends beyond damage to individual installations to the possibility that repeated attacks could disrupt production, transportation, or shipping routes.

Oil prices have increasingly incorporated a geopolitical risk premium as traders weigh the possibility that supplies could be interrupted for an extended period. If the conflict intensifies, higher crude prices could feed into transportation, manufacturing and electricity costs, putting additional pressure on consumers and businesses already exposed to elevated energy expenses.

US President Donald Trump said on Tuesday that the war with Iran would end on his terms, reiterating that Tehran must be prevented from acquiring nuclear weapons. Speaking at a campaign rally in Texas, Trump suggested the conflict could end quickly but maintained that any agreement must ensure Iran would never possess a nuclear weapon.

His comments followed earlier remarks indicating that he was considering whether to pursue an agreement with Tehran or undertake further military action. The uncertainty has left investors weighing two sharply different outcomes: a diplomatic resolution that could ease supply concerns or a further escalation that could push oil prices higher.

The situation significantly matters for energy markets because the duration and geographical reach of the conflict will help determine whether the current price increase remains a temporary risk premium or develops into a more persistent supply shock. A sustained rise in crude prices would also complicate the inflation outlook, potentially limiting the scope for monetary easing even if economic growth weakens.

Political uncertainty in Israel added another layer of risk. Preliminary exit polls suggested that neither Prime Minister Benjamin Netanyahu nor his main challenger, Gadi Eisenkot, had secured a clear path to a governing majority. The rival blocs were projected to fall short of the 61 seats needed to control the 120-member parliament, raising the prospect of prolonged coalition negotiations.

The political stalemate could complicate the outlook for Israel's approach to the conflict with Iran, although the election result alone does not establish how the country's military or diplomatic policy will change.

Treasury Yields Rise As Investors Await Fed Decision

US Treasury yields advanced early Wednesday as investors prepared for the Federal Reserve's latest monetary policy decision, scheduled for later in the session. The increase highlighted the connection between energy-market risks and expectations for interest rates.

The benchmark 10-year Treasury yield rose more than two basis points to 5.0134%. The two-year yield, which is particularly sensitive to expectations for Federal Reserve policy, gained one basis point to 4.7494%. The 30-year yield also advanced by more than one basis point to 5.3200%.

Bond yields and prices move in opposite directions. Higher yields raise borrowing costs across the economy, influencing mortgage rates, consumer credit and corporate financing. They can also weigh on gold by increasing the opportunity cost of holding an asset that does not pay interest.

Markets were largely expecting the Fed to leave its benchmark interest rate unchanged at 3.75% to 4.00%. The CME FedWatch Tool put the probability of a hold at 90.6%, while traders were pricing in a substantial possibility of a rate increase at the December 9 meeting.

Investors were looking for signals from Fed Chair Kevin Warsh's post-decision remarks about how policymakers would respond if energy prices continued to rise. A prolonged oil rally could complicate the central bank's efforts to bring inflation towards its 2% target, particularly if higher fuel and transport costs spread into broader prices.

The inflation outlook will receive another important test on Thursday, when the US releases its Personal Consumption Expenditures price index, the Fed's preferred inflation gauge, alongside quarterly gross domestic product growth and personal income and spending data. Together, the releases should provide a clearer indication of whether price pressures are easing and how resilient consumer demand remains.

Gold Weakens As Higher Oil Prices Support Rate Concerns

Gold prices edged lower on Wednesday as investors assessed the prospect that expensive energy could keep interest rates elevated for longer. Spot gold fell 0.1% to $4,055.59 an ounce by 0854 GMT, retreating after gaining about 1% in the previous session. US gold futures for December delivery also declined 0.1% to $4,070.20.

The modest decline came despite rising geopolitical tensions, which can normally support demand for gold as a safe-haven asset. In this instance, the inflation and interest-rate implications of higher oil prices appeared to be offsetting some of that support.

"The rise in oil prices and the risk that it results in the Fed taking a more hawkish stance than market participants expect appears to be weighing on gold prices," said Hamad Hussain, climate and commodities economist at Capital Economics.

Higher energy prices can complicate the Fed's inflation fight, strengthening expectations that borrowing costs will remain elevated. That raises the opportunity cost of holding gold, which generates no interest income, while a stronger US dollar and higher Treasury yields can further limit its appeal.

Nikos Tzabouras, an independent financial markets analyst, said softer PCE inflation data combined with a less hawkish-than-expected Fed stance could support bullion prices. The outcome therefore depends not only on geopolitical developments but also on the possibility of incoming economic data giving policymakers room to avoid further tightening.

A Reuters survey showed analysts had lowered their 2026 gold price forecasts for a second consecutive quarter, citing high Treasury yields, a strong dollar and expectations that interest rates would remain higher for longer. However, respondents still anticipated a recovery in 2027.

Forecasts for platinum and palladium were also cut for a third consecutive quarter, suggesting that the pressure on precious metals extends beyond gold's immediate response to the Middle East conflict and the Fed decision.

Among other metals, spot silver fell 0.6% to $54.04 an ounce, platinum declined 0.1% to $1,538.50, while palladium rose 0.2% to $1,027.80.