Brent crude futures settled at $92.68 a barrel, up 76 cents, or 0.8%. West Texas Intermediate crude futures finished at $91.48 a barrel, up 18 cents, or 0.20%.

For the week, Brent crude rose 7.6% while U.S. crude gained nearly 10% as supply routes in the Middle East remain impaired due to the war.

The rally in oil prices combined with a much steeper increase in fuel prices has ‌pushed inflation and government ⁠borrowing costs ⁠higher around the world and intensified fears that global economic growth might pull back without some relief.

“All sectors of the economy are affected by diesel. This is one ​of the reasons why the government bond yields in the United States are so high, it’s the expectation that inflation will continue to go ​up,” said Claudio Galimberti, chief economist at Rystad Energy.

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Average U.S. diesel prices hit record highs as renewed U.S.-Iran hostilities and Ukrainian attacks on Russian refineries increased supply disruptions. A gallon of diesel now costs $5.85 on average in the U.S., according to AAA data.
The price of diesel could ​rise even further due to the sharp drawdown in inventories and as agricultural states ⁠in various parts ‌of the country head into harvesting and planting seasons. Diesel is a primary fuel for ag equipment. ​Its equivalent futures contract, ​heating oil, has also surged as winter approaches.Citi raised its average Brent crude price forecast for the ⁠third quarter to $86 a barrel from $80, saying the reopening of the Strait of ​Hormuz was taking longer than previously expected.

ANZ analysts raised their short-term Brent crude forecast to $95 ​a barrel, with upside risk if the Middle East conflict intensifies.

The U.S. economy added 162,000 jobs in August, allaying fears of weakness in the labor market, but bolstering the case for the U.S. Federal Reserve to raise rates later in September.

“The strong employment figures points to an interest rate hike by the Federal Reserve and that was weighing on WTI,” said John Kilduff, partner with Again Capital.

TANKER FLOWS REMAIN IMPAIRED

The U.S. government has said Middle Eastern oil flows have returned to near normal levels in recent weeks, but analysts and ‌tanker trackers indicate that flows remain seriously disrupted.

Four commodity vessels transited the Strait of Hormuz on Thursday, well below the 10-day average tally of about 15, preliminary shipping data showed.

“Oil seems to be in a phase where ​the conflict’s gridlock ​and recurring hostilities are regularly awakening ⁠a risk premium embedded in prices,” said Norbert Rucker, head of economics and next generation research at Julius Baer.

“So far, there is no indication that this week’s escalation materially impacted exports out of the Middle East and tightened the oil market,” Rucker said. “Oil’s current rally ​seems mostly mood and fear driven.”

U.S. attacks this week that killed and wounded dozens, including Iranian civilians, were the fiercest clashes between the two countries since July.

The U.S. campaign to throttle Iran’s economy by blockading its oil exports and stopping sanctions evasion is growing increasingly difficult to withstand, three senior Iranian sources said.

Iraq increased its August oil exports to about 2.34 million barrels per day from about 1.35 million bpd in July, two Iraqi energy officials said on Wednesday.

Spot gold slipped 1.1% to $4,422.91 per ounce by 10:50 a.m. EDT (1447 GMT), putting it on track for a mild weekly decline. After ‌the data, ⁠bullion fell ⁠more than 2% to an intraday low of $4,364.99 per ounce.

U.S. gold futures for December delivery dropped ​1.5% to $4,469.80 per ounce.

U.S. job growth accelerated sharply in August while the unemployment rate held steady at 4.1%, pointing to a still stable labor market and keeping an interest rate hike from the Federal Reserve this month on the table.

“Gold stumbles ​badly as a huge headline print, and an overall ⁠strong report, ‌makes a September rate hike much more likely unless we ​get a ​weak CPI report,” independent analyst Tai Wong said.

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Short-term interest rate ⁠futures prices now imply about a 65% chance of an ​increase in the U.S. policy rate at the Fed’s ​September 15 to 16 meeting, up from about 55% before the Bureau of Labor Statistics report.
The focus now shifts to next week’s U.S. consumer and producer price inflation data, which could provide further clues on the Federal Reserve’s policy path.”This latest jobs report follows Chair Warsh’s hawkish speech at Jackson Hole and ‌appears to have cracked the door even wider for the Fed to follow through with its hiking bias, perhaps as soon as ​this month,” ​said Han Tan, chief ⁠market analyst at Bybit.

“With the price stability mandate at the forefront of policymakers’ minds, next week’s U.S. CPI prints may yet trigger bigger moves for the precious ​metal,” added Han.

Meanwhile, the U.S. dollar jumped after the report, making greenback-denominated gold more expensive for holders of other currencies. [USD/]

Among other metals, spot silver fell 1.7% to $65.79 per ounce, platinum slipped 0.8% to $1,811.83 per ounce, and palladium dropped 1.6% to $1,397.75. All three metals were headed for a weekly decline.

The dollar gave up some ​of its early gains, however, as U.S. markets head into a three-day holiday weekend and as traders waited on next week’s inflation data. Labor Day on Monday is a U.S. public holiday.

August’s job gains followed an unexpected 23,000 job decline in July. The unemployment rate held steady at ‌4.1%.

“I don’t think ⁠this number ⁠changes anything really,” said Noel Dixon, senior macro strategist at State Street, pointing ahead to next week’s inflation reading. “It’s all going to boil down to what ​that core number is going to be next week and I think the markets are going to react accordingly.”

Economic data for August ​is seen as key to whether the Fed will hike at its September 15-16 meeting. Fed Governor Christopher Waller said on Thursday that if upcoming data confirms inflation pressures are cooling off, he is inclined to argue in favor of keeping ​interest rates steady.

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Producer price inflation data is due on Thursday and consumer price ⁠inflation data is ‌scheduled for Friday next week. Economists expect core CPI to ease to 2.4% on the year, from ​2.5% in July.
Elements ​of Friday’s jobs data also supported slowing inflation, Dixon said.”In today’s number the unemployment rate ⁠stayed steady but if you look at wages year over year, that’s the ​lowest since June 2021. So if Waller and (Fed Chairman Kevin) Warsh and (Fed Bank of New ​York President John) Williams, who I think are very influential, wanted to hang their hat on something, they could hang it on that,” Dixon added.

Wages increased 3.1% in the 12 months through August after rising 3.2% in July.

Fed funds futures traders raised bets on a September hike to 57%, from 50% before the data.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.21% to 99.17, with the euro down 0.12% at $1.1611.

YEN SURGE

Against the ‌Japanese yen, the dollar strengthened 0.26% to 156.19.

The yen has surged this week, however, as traders boost bets on more or faster Bank of Japan interest rate hikes, and it is testing the 155.21 level, ​which was its ​high after last month’s U.S.-Japan intervention. ⁠If it breaks through that, it will reach its strongest level since May 6.

Japan’s top currency diplomat, Atsushi Mimura, said on Friday he remained on alert to exchange-rate moves, maintaining a warning on Tokyo’s readiness to intervene in the market ​to combat excessive yen declines.

Traders are also speculating on whether Japanese investors, including insurance companies and pension funds, will pull investments out of U.S. Treasuries and into Japanese government bonds as Japanese debt yields rise.

JPMorgan said expectations for Japanese pension fund repatriation and BOJ rate hikes “look somewhat overdone” at the moment, but added that an unwinding of an estimated 16 trillion to 17 trillion yen ($102.36 billion to $108.76 billion) in yen shorts could send the dollar to a 142-to-146 range against the Japanese currency.

In cryptocurrencies, bitcoin fell 2.32% to $79,595.

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