Geopolitical tensions have been increasing in several regions, causing the price of oil and gold to rise. The sharp increase follows a period of investors looking for important inflation data and weighing the likelihood of changes to interest rates by the Federal Reserve.

Both U.S. and Brent crude were up, with U.S. crude gaining 0.61% to $83.71 a barrel and Brent crude edging up to $89.46, its sixth straight session of gains. The two indexes were at their highest levels since late July and are also near record highs in 2019. Investors also turned to gold and silver, with both metals rising, with spot gold trading at $4,400.44 an ounce and silver up 1% on the day, as concern over China’s economic growth and the prospect of a new war in the Middle East spooked investors.

Middle East Tensions and Asian Geopolitical Risks

The current conflict between Iran and the continuing disruption in the Strait of Hormuz continue to have a strong impact on markets. Both the United States and Yemen’s Iran-backed Houthis have claimed to have been engaged in a sea battle. Sadly, four crew members were killed by the Houthis in an attack on a ship they own, but that belongs to the Egyptians, recently. Meanwhile, U.S. Defense reported military strikes against a container ship trying to go towards an Iranian port.

Asia was further rocked by a North Korean ballistic missile launch just days ahead of the big South Korea–US military drills. Moreover, Taiwan has strongly protested planned naval maneuvers by the Chinese Navy and a warship from Indonesia in the East China Sea.

At the same time, investors are keenly waiting for the U.S. consumer price index (CPI) data. Consumer price inflation is forecast to increase slightly to 3.4% for July, but to decrease slightly for the year. The key numbers will be a major factor in the outlook of Treasuries, the dollar and even equity markets as some officials have suggested that they will continue to hike rates if inflation does not ease in September.

The Asian markets were mixed on the news. Australia-based MSCI’s share index of the broader Asia-Pacific region outside of Japan gained 0.8% as technology stocks surged in South Korea, which saw its Kospi index rise 4%. The yen was slightly weaker following reports of suspected rounds of currency intervention, while the Bank of Japan and other regulators keep a close eye on the currency. Japanese bond yields too also jumped to multi-year highs, as markets were reacting to the prospect of a possible early rate hike in Japan.