Oil and Yields Pressure Markets Ahead of Fed Minutes

EUR/USD comes under pressure around 1.1575 in early Asian trading on Tuesday, snapping a three-session winning streak. The Euro weakens against the US Dollar as renewed concerns over the US-Iran conflict and disruptions around the Strait of Hormuz encourage caution among traders.

US President Donald Trump said on Monday that he was not interested in extending the expiring agreement with Iran. Meanwhile, Iran’s Foreign Ministry spokesman Esmail Baghaei said an agreement remained out of reach because of security complexities and what he described as the “obstructionist behavior of destructive elements,” while calling on the US to lift its blockade.

Persistent tensions in the Middle East could support demand for the safe-haven US Dollar and weigh on EUR/USD in the near term. However, declining expectations for a September Federal Reserve rate hike, following weaker US economic data, could limit the Greenback’s upside.

US Retail Sales fell in July for the first time in nine months, while recent job losses and subdued inflation have further reduced expectations for tighter monetary policy. According to the CME FedWatch Tool, markets are now pricing a roughly 35% probability of a Fed rate hike at the September meeting, down from 47% a month earlier.

Gold  comes under renewed pressure, falling below $4,400 during Tuesday’s Asian session after failing to extend its two-day advance. The precious metal is weighed down by a rebound in the US Dollar, while rising crude oil prices are raising concerns that inflation could remain elevated for longer.

Higher energy prices are keeping the Federal Reserve’s policy outlook in focus, with markets reassessing expectations for interest rate cuts. Although softer US inflation and Retail Sales data last week reduced expectations for an imminent rate hike, traders continue to see a greater possibility of the Fed raising borrowing costs at least once before the end of 2026.

The prospect of a more cautious Fed stance is also reflected in US Treasury yields, which remain supportive of the Greenback and create a headwind for non-yielding Gold.

Attention now turns to Wednesday’s FOMC Minutes for fresh clues on the central bank’s policy outlook. The minutes could offer further insight into how policymakers are assessing persistent inflation risks and the labor market, potentially setting the tone for the US Dollar and Gold in the near term.

Oil prices extend their gains on Tuesday, with Brent crude trading around $91.50 a barrel and WTI near $85.25. Prices remain supported by growing concerns over supply disruptions as progress toward reopening the Strait of Hormuz stalls.

The number of vessels crossing the strategic waterway remains limited, while a projectile struck a vessel transiting out of the Strait on Tuesday. Any prolonged disruption to tanker traffic could tighten global oil supplies and keep prices elevated in the near term.

The latest developments have also raised concerns about the outlook for the fourth quarter and into 2027, with the prolonged disruption potentially keeping a risk premium embedded in crude prices. Analysts expect oil to remain volatile as markets assess the duration of the supply constraints and the prospects for a broader escalation.

Meanwhile, markets are awaiting fresh US inventory data for further clues on the supply-demand balance. A preliminary Reuters poll indicated that US crude stockpiles were likely to have declined last week, alongside product inventories, potentially providing additional support to oil prices.

Wall Street closed lower on Monday after a record-setting week, with rising oil prices weighing on sentiment as uncertainty surrounding the Middle East conflict persisted.

The pullback came after US equities reached fresh records last week, supported by solid corporate earnings and softer inflation data. July consumer and producer price readings, combined with weaker employment and Retail Sales data, have eased concerns about an immediate shift toward tighter Federal Reserve policy.

Markets now await Wednesday’s FOMC Minutes for further clues on the Fed’s rate outlook. The minutes could attract particular attention after three regional Fed presidents dissented at the July meeting in favor of a 25-basis-point rate hike.

Meanwhile, the earnings calendar brings results from major retailers including Home Depot and Walmart, offering fresh insight into the strength of US consumer spending. Target and Lowe’s are also scheduled to report, while investors will assess whether persistent inflation and elevated borrowing costs are affecting household demand.