Oil jumps more than 2% as tensions between the US and Iran escalate again

Oil prices rose on Monday as US-Iran tensions escalated, increasing fears of further disruptions to crude supplies and shipping through the Strait of Hormuz. Tensions between the US and Iran escalated further over the weekend, with President Trump threatening to target Kharg Island, Irans main oil export terminal. US forces also struck two Iranian rocket launchers on Larak Island. Brent crude gained 2.5% to $90.66 per barrel, while WTI rose 2.6% to $85.70.

Meanwhile, the Japanese yen weakened against the dollar as USDJPY briefly rose above 160.00, giving back much of its gains following recent US-Japan intervention.

In the US, stock futures fell in early trading today as the US-Iran conflict escalated. Dow futures fell 0.3%, S&P 500 futures 0.4%, and Nasdaq-100 futures 0.4%, while Asian markets also traded lower. These declines also follow last Friday's Jackson Hole speech by Fed Chair Kevin Warsh where he struck a hawkish tone, suggesting that underlying inflation may not have improved significantly. As a result, markets increased the probability of a September rate hike to 59%, up from 40% a week earlier, supporting the US dollar and weighing on gold prices.

Gold extended its correction today, falling below $4,400. The decline was driven mainly by renewed expectations of a September Fed rate hike and escalating US-Iran tensions, which pushed oil prices and inflation concerns higher.

Investors now will focus on the US Nonfarm Payrolls due later this week, the jobs report will be crucial in determining whether gold continues its correction or stages a recovery from the $4,400 area.