Oil surges on Houthi strikes; German trade surplus widens

Key headlines from the day:

Market movements:

• WTI crude oil climbed 2.66% to $93.91
• Gold dropped 0.22% to $4,395
• The euro weakened 0.10% against the dollar to 1.1610
• The dollar edged up 0.03% against the yen to 154.36
• The S&P 500 fell 0.35% to 7,700.00
• Bitcoin declined 1.07% to $78,401

The session was quiet in terms of data and releases. Germany's trade surplus expanded sharply to €21.3 billion in July from €15.4 billion, but the improvement was mainly due to a 5.7% slump in imports, while exports fell 0.8%. In contrast, France's trade deficit widened to €6.67 billion from €5.75 billion, as imports rose more strongly than exports. Overall, the data indicate a mixed picture for the eurozone's external sector, with Germany's headline surplus masking weaker trade activity, and France continuing to struggle with higher import costs, particularly from energy.

US small business sentiment cooled in August, with the NFIB index slipping to 98.7 from 99.8 in July, below the forecast of 99.3. The decline was mainly due to weaker expectations for business conditions and softer sales, while inflation became a bigger concern, with 16% of owners citing it as their top problem. Hiring plans also softened, though concerns over labor costs fell to their lowest since March 2021. Overall, the survey points to some cooling in small-business activity and sentiment, but the index remains above its long-run average.

Oil prices extended their gains after Iran-backed Houthis launched drone and ballistic missile attacks on southern Saudi Arabia, hitting energy and military sites and disrupting operations at some facilities. Saudi authorities reported 73 injuries and fires at several energy sites, while the Saudi-led coalition vowed a firm response, calling the attacks a dangerous escalation. The developments have added to concerns over regional supply disruptions.

The US session will feature only the weekly ADP jobs data and the New York Fed consumer inflation expectations survey. These releases are unlikely to alter the Fed's stance, so market reaction is expected to be subdued.

The Federal Reserve is now entirely focused on inflation, and Friday's US CPI report will determine whether the central bank raises rates at its next meeting or holds them steady. The CPI data is the week's main event, barring a surprising breakthrough in US-Iran relations.