Oil prices were little changed on Wednesday after a 4% surge in the previous session as markets assess the possibilities of supply disruptions due to the Iran-Israel conflict, with questions about a possible entry by the US.

US crude futures rose 0.2% to $76.61 a barrel as of 10:58 GMT, while US West Texas futures added 0.2% to $75.01 a barrel, after a 1% drop earlier in the session.

Trump Threatens 

US President Trump warned that America’ patience is running out, and called for Iran’s unconditional surrender.

Trump earlier said the US won’t kill Khamenei for the time being but his remarks continued to grow more aggressive every day.

Analysts worry that a US entry into the fray would widen the scope of the conflict and threaten the region’s energy infrastructure. 

The possibility of the closure of the Hormuz strait in particular is of a huge concern to many investors and could send oil prices to over $120 a barrel according to some analysts.

Iran is currently OPEC’s third biggest oil producer at 3.3 million bpd.

Will the Crisis Push the Fed to Cut Rates?

Now markets await the Federal Reserve’s policy decisions later today, expected to maintain rates unchanged at below 4.5%.

But global tensions and concerns about growth could prompt the Fed to cut rates by 25 basis points in July, faster than the September timeline expected by analysts. 

Inventory Drawdown

Initial data from the American Petroleum Institute showed US crude stocks fell by 10.1 million barrels in the week ending June 13, with official EIA data scheduled later today.

Gold prices fell in European trade on Wednesday, resuming losses and backing off two-month highs on profit-taking as investors shun big positions before the Fed’s policy decisions later today. 

Analysts widely expected the Fed to maintain interest rates unchanged for the fourth straight meeting as markets await fresh clues on the path ahead for monetary policies this year.

The Price

Gold prices fell 0.5% today to $3370 an ounce, with a session-high at $3400.

On Tuesday, gold rose 0.1% after losing 1.4% in the previous session away from a two-month high at $3451.

The Fed

The Federal Reserve is convening later today to discuss policies, and is widely expected to hold interest rates unchanged at below 4.5% for the fourth straight meeting. 

The Fed will likely also provide important clues on the future path of US interest rates this year amid mounting geopolitical tensions related to Trump’s tariffs.

US Rates

According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in June stood at 1%.

The odds of a July rate cut stood at a slightly better 19%.

Now traders expect 50 basis points of Fed rate cuts overall this year, starting with September then October. 

SPDR

Gold holdings at the SPDR Gold Trust rose 4.01 tons yesterday, the fourth increase in a row, to a total of 945.94 tons, the highest since April 29.

UK consumer prices rose 3.4% y/y in May, above estimates of a 3.3% rise, but down from a 3.5% rise in the previous reading.

Core prices rose 3.5% y/y as expected, down from 3.8% in the previous reading. 

Sterling rose in European trade on Wednesday against a basket of major rivals, and held its ground above four-week lows against the dollar, on active short-covering as the US dollar tapers off.

The divisions within the Bank of England on the future path of policy easing hurt the odds of a rate cut this week, with traders now awaiting fresh UK inflation data later today to gather more clues.

The Price

The GBP/USD price rose 0.15% to $1.3447, with a session-low at $1.3421.

The pound lost 1.1% on Tuesday against the dollar, the second loss in three days, and the heftiest since April 25 on strong haven demand on the dollar.

US Dollar

The dollar index fell over 0.15% on Wednesday away from a one-week high against a basket of major rivals.

It fell on profit-taking while investors shun new positions before the Fed’s policy decisions later today.

The Fed is widely expected to maintain rates unchanged at 4.5% for the fourth straight meeting, and will likely provide clues on the future path of monetary policies this year.

UK Rates

The latest Bank of England’s policy meeting in May showed a clear division between members on policy.

The BOE will meet this week to discuss latest developments, especially as the UK government reached milestone trade deals with both the US and the EU.

The current odds of a BOE 0.25% interest rate cut this week stood at below 30%.

Now investors await crucial UK inflation data to gather additional clues, with consumer prices expected up 3.3% y/y in May, down from 3.5% in April, while core prices are expected up 3.5% last month.