Author: Fiona Craig

Crude oil prices increased on Wednesday as investors monitored the security situation in the Middle East and a larger-than-expected reduction in US oil inventories. Concerns about shipping through the Strait of Hormuz remained a focus amid uncertainty surrounding the conflict involving Iran.

Brent crude futures rose 1.1% to $109.96 per barrel at 05:28 ET (09:28 GMT), while West Texas Intermediate (WTI) futures gained 1.2% to $99.01 per barrel.

The gains followed renewed reports about the possibility of further military operations against Iran, alongside continued concerns about the movement of oil shipments through one of the world’s principal energy transportation routes.

Reports of Possible Israeli Offensive Add to Supply Uncertainty

Israeli Prime Minister Benjamin Netanyahu is seeking to restart large-scale military strikes against Iran, according to a report published by the Financial Times on Wednesday.

The newspaper said Netanyahu had instructed the Israeli military to prepare another offensive earlier in October. Those plans were not implemented after US President Donald Trump called for attacks on Iran to be suspended until after the November US midterm elections, according to the report.

The prospect of renewed hostilities has kept attention on the Strait of Hormuz, where maritime traffic has faced restrictions since the conflict began in February.

Any further disruption to shipping could affect the movement of crude oil and other energy products from the Middle East.

Oil prices had briefly fallen on Tuesday after unconfirmed reports suggested that Qatar and Pakistan had proposed restarting negotiations to end the conflict.

Brent declined from approximately $112 to $106 per barrel following those reports, before recovering as doubts emerged about the prospects for an agreement.

The subsequent increase followed reports of remarks attributed to Iran’s president suggesting that the United States might carry out further attacks if negotiations resumed.

Shipping Security Remains a Concern in the Strait of Hormuz

Iranian media reported on Tuesday that another supertanker had caught fire in the Strait of Hormuz, citing the Islamic Revolutionary Guard Corps.

The report followed other incidents affecting commercial shipping in the area during recent weeks.

Fighting involving Saudi Arabia and Yemen’s Iran-backed Houthi movement has also contributed to uncertainty over regional energy transportation.

David Morrison, senior market analyst at Trade Nation, highlighted the relationship between prolonged hostilities and the availability of emergency oil reserves.

“Oil prices have stayed relatively subdued given the supply risks. But as hostilities drag on, and as it’s no longer possible to draw on significant strategic reserves, there’s a danger that crude prices become unanchored,” Morrison said.

Despite the conflict, Gulf oil exports have exceeded pre-war levels, according to shipping data from Kpler cited by The Wall Street Journal.

The report indicated that US efforts to provide security for vessels crossing the Strait of Hormuz have helped maintain shipments.

However, the newspaper also identified uncertainty about whether current export volumes can be sustained and the financial costs associated with protecting commercial shipping.

API Reports Larger-Than-Expected US Crude Inventory Draw

Figures released by the American Petroleum Institute showed that US crude inventories fell by 4.93 million barrels in the week ended 16 October.

Analysts had expected a reduction of approximately 1.3 million barrels, making the reported decline considerably larger than forecast.

The figures followed two weeks of substantial inventory withdrawals, during which oil production along the US Gulf Coast was affected by Hurricane Isaias.

The latest report provided an additional indication of reduced commercial crude supplies in the United States.

Official government inventory data are scheduled for release later on Wednesday, with market expectations pointing to a decline of around 300,000 barrels.

Although API figures are closely followed by oil traders, they do not necessarily match the official inventory report because the two datasets use different reporting sources and methodologies.

The inventory reductions have occurred while the US Strategic Petroleum Reserve remains at its lowest level in 44 years, following months of emergency withdrawals intended to address disruptions in global energy supplies.

The reduced availability of strategic reserves has added another consideration for market participants assessing the ability of oil supplies to respond to further disruptions.

Oil markets therefore entered Wednesday’s session with attention divided between geopolitical developments, maritime security in the Middle East and changes in US crude stockpiles.

Gold prices moved lower on Wednesday as investors monitored developments surrounding the conflict between the United States and Iran, fluctuations in energy markets and expectations for Federal Reserve monetary policy.

Spot gold declined 0.2% to $4,117.31 per ounce at 02:36 ET (06:36 GMT), while US gold futures fell by the same percentage to $4,134.92 per ounce.

The decline extended across other precious metals. Silver lost 1.2% to $57.2955 per ounce, platinum decreased 1.8% to $1,627.45, and spot palladium fell 1.6% to $1,088.40.

The US Dollar Index rose 0.1% to 101.80, providing an additional factor for investors assessing dollar-denominated commodities.

Bullion has declined more than 1% since the start of the week and remains approximately one-fifth below its level when the US-Iran conflict began in late February.

The conflict has affected energy supplies and contributed to higher oil prices, raising questions about the outlook for inflation and interest rates.

Gold does not provide interest income, meaning higher yields on bonds and other interest-bearing assets can increase the opportunity cost of holding the metal.

Oil Market Volatility Adds to Uncertainty Over Inflation

Oil prices were broadly stable on Wednesday after declining from a five-month high in the previous session.

The earlier retreat followed reports suggesting that diplomatic efforts could lead to an agreement to end the conflict involving Iran.

Those reports were subsequently challenged by a diplomat who rejected suggestions that an agreement was close.

Gold initially gained as oil prices declined following the reports of possible negotiations, before reversing its advance when crude prices recovered.

The US dollar and government bond yields also moved lower during the period of fluctuating energy prices.

Market participants continued to assess the possible effects of developments in the Middle East on energy availability and inflation.

Higher energy prices can contribute to inflationary pressures, potentially influencing the interest rate decisions of central banks.

For gold investors, the relationship between inflation expectations and monetary policy remains relevant because changes in interest rates can affect the relative attractiveness of non-yielding assets.

US Housing Figures Indicate Slower Activity

Recent US economic data provided additional information about conditions in the domestic economy ahead of the Federal Reserve’s next policy meeting.

September housing starts declined, while pending home sales fell to a record low, indicating reduced activity in the residential property market.

Longer-dated US Treasury securities advanced as oil prices retreated and investors considered the economic data.

The movements in Treasury prices were accompanied by lower bond yields, which can affect demand for precious metals.

The housing figures added to the economic indicators being monitored as investors evaluated the potential direction of US monetary policy.

Federal Reserve Expected to Hold Rates in October

The Federal Reserve is scheduled to hold its next monetary policy meeting on 27–28 October, with market participants largely expecting no change to the benchmark interest rate.

Comments from Fed Chair Kevin Warsh on Friday did not materially alter those expectations.

Market pricing indicated a probability of less than 17% that policymakers would raise interest rates by 25 basis points at the October meeting.

Nevertheless, inflation remains above the Fed’s 2% target, and traders were assigning an approximately 85% probability to another rate increase before the end of 2026.

Warsh’s remarks preceded the central bank’s communications blackout period, which begins on Saturday and restricts public commentary from Federal Reserve officials ahead of the policy decision.

With limited additional guidance expected from policymakers before the meeting, investors are focusing on economic releases, Treasury yields and developments in energy markets.

Gold’s decline on Wednesday came as uncertainty surrounding the Iran conflict and the direction of US interest rates continued to influence precious metals trading.

European wholesale natural gas prices advanced more than 3% on Wednesday as disruptions to energy shipments through the Persian Gulf and lower regional storage levels continued to affect supply conditions ahead of the winter heating season.

The benchmark Dutch TTF front-month contract rose 3.1% to €87.95 per megawatt-hour (MWh), while UK National Balancing Point (NBP) natural gas futures increased 3.2% to 216.57 pence per therm. Both contracts were trading near their highest levels since late 2022.

The price increases coincided with the publication of UK inflation figures showing that annual consumer price inflation reached 3.5% in September, up from 3.1% in August and above market expectations.

Higher energy import costs remain a consideration for the British economy, which relies on pipeline gas and liquefied natural gas (LNG) shipments to meet domestic heating and electricity generation requirements.

The UK’s relatively limited long-term gas storage capacity also leaves the country dependent on continuing imports during periods of increased demand.

European gas benchmarks have recorded substantial gains since the beginning of 2026. Dutch TTF prices were approximately 210% higher year to date, while the UK NBP benchmark had risen around 196%.

Supply disruptions in the Persian Gulf have contributed to the increase in prices. Maritime strikes and restrictions affecting transit through the Strait of Hormuz have reduced the availability of LNG shipments from the Middle East.

According to the reported figures, Middle Eastern LNG deliveries to Europe were nearly 80% below their level a year earlier.

The reduction in available supplies has increased competition between European and Asian importers for LNG cargoes from the Atlantic basin, particularly those not already committed under long-term contracts.

European gas storage inventories have also become an important factor as the winter heating season approaches.

Underground storage facilities across Europe were reported to be approximately 74.6% full, their lowest seasonal level since 2009.

The lower storage level reduces the volume of gas available to meet additional demand or compensate for interruptions to imported supplies.

The combination of restricted LNG shipments, competition for alternative cargoes and reduced storage inventories has contributed to higher wholesale gas prices across Europe.

The latest UK inflation figures have added to the broader economic context, although the immediate movement in gas futures primarily coincided with developments affecting supply availability and expectations for winter demand.

Entain (LSE:ENT) shares rose 4.5% to 454.5p on Wednesday, following recent financial updates from the gambling group and its BetMGM joint venture, alongside analyst assessments of the company’s outlook.

BetMGM, the 50-50 joint venture between Entain and MGM Resorts International, reported third-quarter 2026 net revenue of $710 million, representing a 7% increase compared with the same period last year.

Adjusted EBITDA rose 112% to $86 million, while the joint venture distributed $68 million in cash to its two parent companies during the quarter.

The results followed Entain’s third-quarter trading update on 15 October, which showed growth in its UK and Ireland online operations.

Online net gaming revenue (NGR) in the region increased 14%, exceeding market expectations. Within this segment, gaming revenue rose 17%, while online volumes increased 15%.

Entain also reported double-digit growth in New Zealand, Spain and Canada, although its Brazilian operations continued to face difficulties associated with the country’s nationwide restrictions on online gambling.

The company maintained its financial guidance for the full year 2026, forecasting online net gaming revenue growth of between 4% and 6% at constant exchange rates.

Entain also reiterated its expectation that underlying EBITDA would be at the lower end of its previously announced range of £910 million to £960 million.

The group’s latest trading figures and the performance of BetMGM have been accompanied by updated analyst recommendations.

Goldman Sachs maintained its Buy rating on Entain but reduced its price target to £8.00 from £10.40.

Morgan Stanley also retained its Overweight recommendation while lowering its target price to £10.00 from £10.50.

Both investment banks therefore maintained their existing ratings despite revising their valuations of the company’s shares.

The broader UK equity market was also supported by developments in US corporate earnings and bond yields, although investors remained focused on forthcoming UK inflation and government borrowing figures.

During Wednesday’s session, Entain shares traded close to an intraday high of 458.3p.

At 454.5p, the stock remained below its 52-week high of 826.6p.

The share price increase followed the publication of BetMGM’s quarterly results, which showed higher revenue, adjusted EBITDA and cash distributions, together with Entain’s previously reported growth in its UK and Ireland online business.

The company continues to target full-year online revenue growth while maintaining its existing underlying EBITDA guidance. The relative contribution of these developments to Wednesday’s share price movement cannot be determined from the available information.

Carrefour (EU:CA) shares declined more than 11% on Wednesday after the French retail group reduced its full-year financial forecasts, citing deteriorating social and security conditions in France that have affected store operations and consumer spending.

The company reported third-quarter like-for-like sales growth of 2.3%, compared with an increase of 2.1% during the first half of 2026.

Despite the quarterly sales increase, Carrefour revised its expectations for operating profitability, earnings per share and cash generation for the full year.

The retailer now forecasts growth in its recurring operating income margin of between zero and 15 basis points, compared with its previous target of 25 basis points.

Carrefour also reduced its adjusted earnings per share guidance, now expecting broadly stable earnings or slight growth rather than the high single-digit increase previously anticipated.

The company revised its net free cash flow outlook from slight growth to a slight decline for 2026.

Management attributed the changes to recent developments in France, which have disrupted operations at a number of urban stores and created uncertainty surrounding consumer spending.

In its domestic market, Carrefour recorded third-quarter like-for-like sales growth of 1.2%, with increases across its different store formats.

The company said pricing investments made earlier in the year contributed to the French sales performance.

In Spain, like-for-like sales rose 2.1%, supported by higher sales volumes.

Brazil reported like-for-like growth of 1.4%, with the Atacadão retail format contributing to the increase.

Alexandre Bompard, Chairman and Chief Executive Officer of Carrefour, commented on the group’s quarterly trading performance and the situation affecting its French operations.

“Carrefour recorded +2.3% like-for-like sales growth in the third quarter, in line with the first half of the year, driven by food sales and the positive contribution from our core markets,” Bompard said.

“The events that have taken place in France over the last few days have affected a significant number of our stores in urban areas and have placed our teams and partners in particularly difficult situations.”

The company indicated that recent events had affected a significant number of stores in French urban areas, complicating the operating environment ahead of the year-end retail period.

Carrefour also reported an 18% increase in e-commerce sales during the third quarter, reflecting growth in its online retail activities.

The group continued expanding its convenience store network, opening 89 new locations across France and Spain during the period.

The quarterly results therefore showed increased like-for-like sales across Carrefour’s principal markets, alongside growth in online sales and further store openings.

However, the retailer’s revised financial guidance reflects its assessment of the potential effects of current operating conditions in France on profitability and cash flow during the remainder of 2026.

The reduction in its full-year targets coincided with a decline of more than 11% in Carrefour’s share price during Wednesday’s trading session.