Dollar hits year-to-date lows as bulls get nervous

SINGAPORE – The yen shot to a 2-1/2 month high on Friday on the back of a jump in Japanese inflation, while the dollar was set for a third weekly drop in a row as traders calculated the start of Donald Trump’s second term has been mostly bluster on the tariff front.

The yen broke through chart resistance at 150 per dollar overnight and it strengthened as far as 149.285 per dollar in the Asia morning after Japan recorded core inflation running at its fastest pace for 19 months in January.

The euro was up 0.8% overnight and was steady in Asia at USD 1.0498 with traders awaiting an election in Germany on the weekend where polls point to a conservative coalition win.

The dollar nursed broad losses as bulls who had built up big long positions in anticipation of a trade war have backed off while Trump equivocates about tariffs.

Trump has slapped an additional 10% tariff on Chinese goods and announced plans to reimpose steel and aluminum levies from his first term, but suspended threatened tariffs on Canada and Mexico while numerous others remain – as of yet – only threats.

“It was a very one-sided trade and very heavy long positioning,” said Jason Wong, strategist at BNZ in Wellington.

“Some of those longs are becoming impatient because the only thing he has done is put (a) 10% (tariff) on China – so the market is taking some of that money off the table.”

Wong said evidence that Japan’s inflation was tipping higher – the core consumer price index rose to an annual 3.2% against expectations for 3.1% – also bolstered the case for higher Japanese rates at a time when the rest of the world might be cutting, and so a higher yen.

The yen is up 3.6% on the dollar through February so far. Japanese bonds were sold off on Friday and interest rate markets have priced in a 25 basis point rate hike in Japan by September.

A remark from Trump that a trade deal with China was possible lifted the trade-sensitive Australian and New Zealand dollars.

Comments from his Treasury secretary, Scott Bessent, that the administration had no plans to increase long-dated debt sales put downward pressure on yields and the dollar.

The dollar index on Thursday touched its lowest for 2025 at 106.29 and was last at 106.45.

The Aussie and kiwi are trading at their highest levels this year despite rate cuts on both sides of the Tasman this week, and New Zealand’s central bank flagging more to come.

Australia is in a position where there could be some more decreases in interest rates but policymakers have to be cautious, the country’s top central banker said on Friday.

The kiwi touched USD 0.5772 on Friday morning, while the Aussie has broken above 64 cents for the first time this year and touched USD 0.6404.

Trump said Chinese President Xi Jinping would visit the US, without giving a timeline, which sent up the yuan to a one-month high in onshore trade on Thursday.

In offshore trade, it was steady at 7.2419 per dollar on Friday.

Sterling touched its highest since mid-December at USD 1.2674.

Later on Friday purchasing managers’ index indicators are released worldwide.

(Reporting by Tom Westbrook; Editing by Jamie Freed)

Trump tariff worries set gold on course for eighth straight weekly gain

Gold prices were little changed on Friday but remained on track for an eighth successive weekly gain, driven by concerns over US President Donald Trump’s tariff plans, which could spark trade wars and stoke inflation.

FUNDAMENTALS

* Spot gold was up 0.1% to USD 2,941.25 an ounce, as of 0018 GMT. Bullion rose about 2% so far this week and scaled an all-time high of USD 2,954.69 on Thursday.

* US gold futures were steady at USD 2,956.60.

* Federal Reserve officials are taking note of what they see as rising inflation risks and the uncertain impact of Trump’s trade, immigration, and other policies.

* “Going forward, I consider it is appropriate to hold the federal funds rate in place for some time, given the balance of risks that we face right now,” Federal Reserve Governor Adriana Kugler said on Thursday.

* Bullion is seen as a safeguard against geopolitical risks and inflation, but higher interest rates dampen the non-yielding asset’s appeal.

* Earlier this week, Trump said he would announce fresh tariffs over the next month or sooner, adding lumber and forest products to previously announced plans to impose duties on imported cars, semiconductors, and pharmaceuticals.

* Since taking office on January 20, Trump has imposed an additional 10% tariff on Chinese imports and a 25% tariff on steel and aluminum.

* Meanwhile, gold exports from Switzerland rose year-on-year in January as supplies to the US soared to the highest in at least 13 years and offset lower deliveries to top consumers China and India, Swiss customs data showed on Thursday.

* Spot silver was steady at USD 32.93 an ounce. Platinum fell 0.2% to USD 976.42, and palladium firmed 0.4% to USD 981.29.

(Reporting by Anushree Mukherjee in Bengaluru; Editing by Varun H K)

Investors scout for ‘hidden’ defense plays as rally broadens

MILAN/FRANKFURT – Investors are looking beyond the traditional defense stocks that have emerged as star performers in the European market for cheaper industrial companies poised to benefit from increased military spending in the region.

Shares in Thyssenkrupp, whose operations range from making steel and car parts to trading materials and building fertilizer plants, jumped 20% on Monday, driven by an expected surge in defense budgets that could boost its warship division TKMS, which is due to be spun off this year.

The conglomerate has lost 40% of its value in five years, hurt by a lengthy and painful restructuring of its sprawling operations.

However, its defense assets, which include submarines, frigates, and sensor and mine-hunting technology, are now being seen as a potential catalyst for growth.

BofA Global Research called TKMS a “hidden” defense stock, valuing it at half of Thyssenkrupp’s market capitalization. Analysts at the US investment bank noted that defense businesses are now among the most compelling equity stories in Europe. “We see deep value,” they wrote about TKMS.

The market’s recognition of underpriced defense assets could lead to a surge in share prices, driven by higher valuation multiples and earnings growth tied to rising defense spending.

Analysts also cited bus and truck maker Iveco Group and shipbuilder Fincantieri as beneficiaries if the defense rally broadens beyond pure plays, just as some questions emerge about the sustainability of Europe’s rally.

However, investors will need active stock-picking skills to capitalize on this trend, as these opportunities may lie beyond the main equity benchmarks that passive strategies track.

Thyssenkrupp is a mid-cap stock listed on the MDAX index, after tumbling out of the main DAX index in 2019, following a string of profit warnings and the slump in the share price.

Alberto Conca, chief investment officer at Swiss asset manager ZEST+LFG, believes many industrial companies, including those not directly involved in defense, could benefit indirectly from the military boom.

“This makes a lot of sense,” he said.

Iveco’s shares have rocketed since saying earlier this month it could spin off its IDV defense division this year. IDV posted a 10% operating profit margin last year, the only double-digit result from the firm’s industrial businesses.

Having lagged the broader aerospace and defense index since Russia invaded Ukraine three years ago, both Thyssenkrupp and Iveco are catching up fast. This year they are outperforming, having risen 53% and 68% respectively.

World defence companies trade at 25.8 times expected earnings, versus 18 times three years ago, per LSEG Datastream data. Iveco and Thyssenkrupp both trade around 8 times on the same valuation metric.

(USD 1 = 0.9590 euros)

(Reporting by Danilo Masoni; Editing by Amanda Cooper and Sharon Singleton)

Stagflation-lite could still make policymakers sweat: McGeever

ORLANDO, Florida – Policymakers around the world may not like the word ‘stagflation,’ but they’re going to hear a lot more of it this year if the import tariffs US President Donald Trump is threatening to open up a global trade war.

“I don’t use the word stagflation,” Bank of England Governor Andrew Bailey said earlier this month. “It really doesn’t have a particularly, frankly, precise meaning.”

He is correct about the ambiguity. Stagflation was first coined to describe the painful mix of sustained economic stagnation and industrial-scale inflation that scarred Western economies in the 1970s. But it is now used to characterize almost any instance of both below-trend growth and above-trend inflation – essentially stagflation with a small ‘s.’

Even this more moderate version of the dreaded economic disease can cause serious headaches for policymakers whose blunt tools are designed to either boost growth or dampen inflation – not both at the same time.

And with economists in agreement that stagflation could result from tit-for-tat protectionist trade policies, Bailey won’t be the only policymaker with a furrowed brow this year.

GOING GLOBAL

A mix of economic indicators and policymaker comments on Wednesday put a spotlight on the stagflationary menace.

Minutes from the Federal Reserve’s January 28-29 policy meeting showed that firms are inclined to pass on higher input costs from tariffs to their customers, meaning inflation risks appear skewed to the upside. This came after January’s retail sales shock last week reminded investors that the US consumer is not invincible, even if growth is still holding up well enough.

And things could get a lot worse from here. PIMCO’s Tiffany Wilding estimates that Trump’s proposed tariffs on Mexico, Canada and China alone could raise US inflation by 0.8 percentage point and cut growth by 1.2pp in the first year.

Figures from Britain, meanwhile, showed that inflation last month accelerated more than expected to 3%, well above the BoE’s 2% target. This comes as growth is cooling at best, and flat-lining at worst.

Economists at Morgan Stanley and HSBC recently cut their 2025 UK GDP growth forecast to 0.9% from 1.4%, and the BoE said it expects inflation to peak later this year at 3.7% before receding. Bailey and colleagues are in a tight spot.

And intriguingly, two of the European Central Bank’s top policymakers outlined the two sides of the debate on how much further, if at all, policy should be eased.

ECB board member and vocal hawk Isabel Schnabel argued that a “pause or halt” to the bank’s rate cuts may be approaching, while Italian central bank chief Fabio Panetta argued that growth may be even weaker than feared.

Perhaps the case for the ECB cutting rates to below ‘neutral,’ as many observers had begun to build, isn’t so clear-cut after all.

FLATTENING THE CURVE

These signals chime with Bank of America’s latest global fund manager survey which shows that nearly 60% of respondents believe ‘stagflation’ will best describe the world economy over the next 12 months – the largest percentage in seven months.

BNP Paribas strategists reckon US markets are underpricing stagflation risks. Since Trump’s inauguration a month ago, the S&P 500 has ground out new highs, nominal and real Treasury yields have drifted lower, and the yield curve has gradually flattened.

But if traders and investors – many of whom are already on ‘stagflation watch’ – think growth is stagnating and inflation is not coming down, they will likely act accordingly.

That could mean a selloff in stocks and bonds, leading to heightened currency volatility. Britain, which relies on the ‘kindness of strangers’ to plug its large trade deficit, may be particularly vulnerable among developed economies, even more so emerging markets exposed to FX weakness and imported inflation.

The best advice to investors may be, if ‘flation’ stays high, prepare for ‘stag’.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever; Editing by Andrea Ricci)

Oil rises for third day on US fuel stocks draw, worries about Russia disruptions

NEW YORK – Oil prices settled higher on Thursday, marking a three-day streak of gains, after data showed gasoline and distillate drawdowns in the US, while worries about supply disruptions in Russia also supported prices.

Brent futures settled up 44 cents, or 0.58%, at USD 76.48 a barrel. US West Texas Intermediate crude futures (WTI) for March delivery CLc1 rose 32 cents, or 0.44%, to USD 72.57.

The more actively traded April WTI contract gained 0.35% to USD 72.50 a barrel.

US crude oil stockpiles rose slightly more than expected while fuel inventories fell last week as seasonal maintenance at refineries led to lower processing, the Energy Information Administration said on Thursday.

“The crude build was a bit larger than expected, but there was a modest draw in gasoline and larger draw in distillate, keeping total inventories flat,” said Giovanni Staunovo, an analyst with UBS.

Crude futures extended gains slightly following the report.

Russia and the US have had their first meeting since the start of the Ukraine war, aimed at restoring relations and preparing the ground for ending the conflict.

However, disruptions to the oil supply kept prices elevated.

Russia attacked Ukrainian gas infrastructure and damaged gas production facilities overnight, Ukraine’s Energy Minister German Galushchenko said.

Russia said Caspian Pipeline Consortium oil flows, a major route for crude exports from Kazakhstan, were reduced by 30%-40% on Tuesday after a Ukraine drone attack on a pumping station.

Elsewhere, potential restarts of oil flows from Iraq’s Kurdistan region were offsetting supply risks, analysts at ING said in a note.

Turkey, which hosts the port of Ceyhan that loads Iraqi oil from the Kurdistan region, had not received confirmation from Iraq on the resumption as of Thursday, the country’s energy minister told Reuters.

A resumption of the Iraqi oil flows would add 300,000 barrels of supply per day onto the market, ING analysts said.

Import tariffs announced by US President Donald Trump’s administration could dent oil prices by raising the cost of consumer goods, analysts said, weakening the global economy and reducing fuel demand. Concerns about European and Chinese demand were also helping keep prices in check.

“It is natural to be concerned about the global economic outlook as Donald Trump takes a sledgehammer smashing away at the existing global ‘free-trade structure’ with signals of 25% tariffs on car imports to the US,” said Bjarne Schieldrop, chief commodities analyst at SEB.

(Reporting by Nicole Jao, Enes Tunagur, and Sudarshan Varadhan; Editing by Muralikumar Anantharaman, Varun H K, Subhranshu Sahu, David Evans, Deepa Babington, and Nia Williams)

US companies swap dollar bonds into euros to lower funding costs

US companies with overseas operations are taking advantage of lower rates in euros to slash their debt funding costs and soften the blow of higher interest rates with a hedging strategy that is expected to expand if the Fed continues to pause rate cuts and other central banks do not, bankers and corporate advisers said.

Demand for cross-currency swaps, a hedge where companies exchange loan principal and interest payments from one currency to another, has steadily picked up as interest rates between the United States and other major economies diverged.

“We have seen activity in both new cross-currency swap transactions and restructurings of existing hedges, mostly USD to EUR flows associated with net investment hedging activity,” said John Wahr, head of rates sales in the derivative products group at US Bank.

Generally, companies turn to cross-currency swaps when there is a positive carry and also a shield against volatility that can come from macroeconomic uncertainty over the impact President Donald Trump’s tariffs and policies might have on inflation, interest rates, and the US economy.

Monthly EUR/USD cross-currency swaps increased 7% in January to USD 266 billion, versus the corresponding period in 2024, according to data from Clarus, an ION company that researches derivatives. The bankers and advisers told Reuters they could not name the companies doing such swaps, citing confidentiality reasons.

Within days of taking over, Trump began rapidly implementing his agenda, including tariffs on steel and aluminum imports and reciprocal tariffs, sparking volatility and raising concerns this could be inflationary and further pause an easing US rate cycle. In another example, Trump on Tuesday said he plans to introduce tariffs on autos, pharmaceuticals and semiconductors.

Companies with overseas cash flows or significant investments in foreign operations can see their value fluctuate with changes in the exchange rate between the local currency and the dollar.

The net investment hedge mitigates that volatility because it offsets the changes in the value of those investments brought on by exchange rate gyrations.

By using cross-currency swaps to convert dollar interest payments to euro interest payments, companies can shave nearly 200 basis points off their interest costs, which could run up to millions of dollars, said Jackie Bowie, managing partner and head of EMEA at risk management firm Chatham Financial.

Companies that started using cross-currency swaps last year, began restructuring them at the start of this year because those trades were more profitable as the euro weakened, said Amol Dhargalkar, managing partner at Chatham.

CURRENCY RISK

Companies were then using those profits for a variety of corporate purposes, including paying down debt, he added.

Still, the flow of swaps is tempered as treasurers were sensitive to creating derivative foreign exchange exposures that may heighten the risk of mark-to-market losses if the underlying foreign currencies were to strengthen, said Marc Fratepietro, co-head of global debt capital markets at Deutsche Bank.

If the foreign currency strengthened relative to the dollar, that could also eat into the interest expense savings for companies doing the swaps, said Eric Merlis, co-head of global markets, at Citizens in Boston.

But for companies that have yet to place these trades, it could still present an attractive entry point from both an interest rate differential and currency perspective, said Merlis, who is seeing companies across the board with exposures in the euro, Canadian dollar, and some dollar/Swiss franc take on the hedges.

“There’s always uncertainty about what the Fed is going to do, or what the ECB is going to do. But this uncertainty has provided our clients with an opportunity to hedge against that macro uncertainty,” he added.

The fragility of such trades was revealed somewhat on Wednesday when euro zone government bond yields rose to their highest in more than two weeks as investors focused on potential extra borrowing amid US-Russia talks on Ukraine and comments from a European Central Bank official floating a pause to rate cuts.

(Reporting by Shankar Ramakrishnan and Laura Matthews; Editing by Anna Driver)

Gold eases as dollar holds ground, focus on Trump tariffs

Gold prices slipped after hitting a record high earlier on Wednesday as the dollar rose, while US President Donald Trump’s latest tariff threats kept investors on edge.

Spot gold lost 0.2% to USD 2,928.49 per ounce as of 2:19 p.m. ET (19:19 GMT). Bullion surged to an all-time high of USD 2,946.85/oz earlier in the session.

US gold futures settled 0.4% lower at USD 2,936.10.

The dollar index rose 0.1% against its rivals, making gold more expensive for other currency holders.

“We are in a state of unusual-heightened uncertainty… the catalyst is the tariffs and trade talks or threats that are going on around the world,” which is supporting the prices, said Paul Wong, market strategist at Sprott Asset Management.

Trump said on Tuesday that he intends to impose auto tariffs “in the neighborhood of 25%”, along with similar duties on semiconductor and pharmaceutical imports.

This follows his recent move to impose a 10% tariff on Chinese imports and a 25% tariff on steel and aluminium earlier this month.

Bullion is seen as a safeguard against geopolitical risks and inflation, but rising interest rates diminish its attractiveness as a non-yielding asset.

Fed officials remain uncertain about the impact tariffs might have on inflation.

Traders currently see at least one 25-basis-point rate cut and a 44% chance of an additional lowering by December, according to LSEG data.

After Donald Trump’s inauguration, Federal Reserve officials expressed concern about inflation, as firms were expected to raise prices to offset import tariffs, policymakers noted at their January meeting.

Following the inauguration of Donald Trump, officials from the Federal Reserve voiced concerns over potential inflation, as they anticipated firms raising prices to offset import tariffs, according to notes from their meeting in January.

Among other metals, spot silver, used in electrical components, shed 0.4% to USD 32.74 an ounce, aiming to challenge a 10-year high.

Platinum declined 1.7% to USD 970.45 and palladium eased 1.6% to USD 971.47.

“Although the imposition of tariffs could hurt silver’s industrial demand, it could still push higher from a valuation perspective,” said Han Tan, Exinity Group chief market analyst.

(Reporting by Daksh Grover, Sarah Qureshi, and Sherin Varghese in Bengaluru; Editing by Shreya Biswas, Shailesh Kuber, and Mohammed Safi Shamsi)

European results-day share volatility emboldens longer-term investors

LONDON – Unusually high volatility in the shares of European companies around their earnings days has prompted a growing number of typically cautious longer-term investors to jump on big price swings.

Volatility in European shares on results days has reached a near-record high, Bank of America data shows, with the fourth-quarter earnings season only around half complete.

Tom Lemaigre, portfolio manager on the European Equities Team at Janus Henderson Investors, was among the long-term investors Reuters spoke to who have found opportunities in the current volatility.

“If you have something that looks incredibly oversold, I can buy more, and if something looks overbought, I can profit-take. It allows me to be tactical,” said Lemaigre, who said he co-manages around 7.5 billion euros (USD 7.8 billion) in assets.

“I always want to be doing this alongside taking a longer-term view. If something falls 20% in one day and I’ve got a three-year time horizon then it can be seen as an opportunity to potentially add or start a position,” he said.

A Reuters analysis in 2024 found hedge funds taking a wide range of trading approaches and a changing market structure were behind the trend that has spurred single-stock volatility to multi-year highs.

BofA’s most recent data shows that companies that missed fourth-quarter expectations have recorded a median one-day underperformance of 2.6%, the biggest since the bank’s records began in 2012. Those beating on earnings per share have recorded a median outperformance of 1.7%, the second strongest on record.

Barry Glavin, head of equity platform at Amundi, Europe’s largest asset manager, also said his team has noticed the trend of outsized reactions to results.

“As disciplined long-term investors who are quite price sensitive, if we get an opportunity to buy a stock at a lower price and our investment thesis is unchanged, we’ll take it,” he said.

BIG MOVES, BOTH WAYS

European companies’ quarterly reports have so far proved generally rosy, as expected. Shares of French luxury giant Richemont recorded their biggest daily jump in 17 years on January 16, surging 16.4% after results beat expectations.

On their respective results days, shares in Dutch payments firm Adyen rose 14.4% and Germany’s Infineon jumped by more than 10%.

Among the companies that saw their share price fall sharply, Swiss lender UBS dropped by 7% on its results day, cognac maker Remy Cointreau lost 7.4%, Randstad, the world’s largest employment agency, fell 6.5%, and Europe’s largest travel operator Tui slid more than 10%.

LONG-TERM VIEW; SHORT-TERM OPPORTUNITIES

Amundi’s Glavin said that while volatility may be uncomfortable, it can offer active long-term managers an opportunity to add value.

Over at RBC BlueBay Asset Management, senior portfolio manager and head of European Equities David Lambert said his team would buy shares in an appropriately valued business after its results if it sees an outsized move on an unchanged outlook.

“We would trade around those – not aggressively – but there have been more opportunities more recently given some of the volatility,” said Lambert, who manages around C$ 7 billion (USD 4.9 billion) in assets.

“Long term you have to be nimble and have the ability and the agility to add and to take away from positions if the market moves aggressively…you might have a move to the upside, which can be hard to rationalize sometimes, so why not lock in some of that?”

(USD 1 = 0.9570 euros)

(USD 1 = 1.4201 Canadian dollars)

(Reporting by Lucy Raitano; Editing by Amanda Cooper and Kirsten Donovan)

Yields fall as Fed weighs slowing or pausing quantitative tightening

NEW YORK – Treasury yields fell on Wednesday after minutes from the Federal Reserve’s January meeting showed that policymakers discussed whether it may be appropriate to slow or pause the runoff in its balance sheet holdings.

The Fed has been letting bonds roll off its balance sheet without replacement since June 2022 as part of its quantitative tightening program. Slowing or pausing the program would be positive for Treasuries as more Fed reinvestment in US government bonds may reduce the amount of debt the Treasury Department needs to offer.

“It’s less debt that the Treasury has to issue, which is bullish for markets,” said Gennadiy Goldberg, head of US rates strategy at TD Securities in New York, adding the comments came as a surprise as “the Fed seemed quite intent to be full speed ahead on runoff up until now.”

Fed officials flagged the challenge of getting a clean read on market liquidity as the Treasury wrangles with the reinstatement of the US debt ceiling on January 2, which affects how it can manage cash.

The Treasury Department has been using extraordinary measures to avert default since then.

Initial policy proposals from President Donald Trump also raised concern at the US central bank about higher inflation, with firms telling the Fed they generally expected to raise prices to pass through the cost of import tariffs, policymakers said at the January 28-29 meeting.

Data on Wednesday showed that US single-family homebuilding fell sharply in January amid disruptions from snowstorms and freezing temperatures, with a rebound likely to be limited by higher costs due to tariffs and elevated mortgage rates.

The yield on benchmark US 10-year notes was last down 0.9 basis points on the day at 4.535%.

The 2-year note yield fell 2.3 basis points to 4.274%.

The yield curve between two-year and 10-year notes steepened by around two basis points to 26 basis points.

Fed funds futures traders are pricing in 37 basis points of easing by year-end, indicating a roughly 50% chance of a second 25 basis point cut.

Market participants are concerned that tariffs will add to inflation and make it more difficult for the Federal Reserve to reduce price pressures and in turn cut interest rates.

But delays in the implementation of many planned tariffs have also boosted expectations that the levies will be used primarily as a negotiation tool.

On Friday, Trump said levies on automobiles would come as soon as April 2. On Tuesday, he said he intends to impose auto tariffs “in the neighborhood of 25%” and similar duties on semiconductors and pharmaceutical imports.

“The market’s reaction function is showing fatigue with respect to the headlines, and it’s going to come down to more – what is actually realized in terms of tariffs? Which feels like a moving target to say the least right now,” said Zachary Griffiths, head of US investment grade and macro strategy at CreditSights in Charlotte, North Carolina.

The Treasury saw soft demand for a USD 16 billion sale of 20-year bonds on Wednesday, which took place before the Fed meeting minutes were released.

The 20-year bonds sold at a high yield of 4.830%, around a basis point above where they traded before the auction.

Demand was 2.43 times the amount of debt on offer, the lowest since November.

The Treasury will also sell USD 9 billion in 30-year Treasury Inflation-Protected Securities on Thursday.

Traders are watching talks between the US and Russia over a potential end to the Russia-Ukraine war.

Trump on Wednesday denounced Ukrainian President Volodymyr Zelenskiy as “a dictator without elections” and said he had better move fast to secure peace or he would have no country left.

(Reporting by Karen Brettell; editing by Barbara Lewis and Nia Williams)

Oil holds near one-week high on supply concerns, sanctions on Russia eyed

NEW YORK – Oil prices held near a one-week high on Wednesday on worries about supply disruptions in Russia and the US, while the market awaited clarity on sanctions as Washington tries to broker a deal to end the war in Ukraine.

Brent futures rose 20 cents, or 0.3%, to settle at USD 76.04 a barrel, while US West Texas Intermediate (WTI) crude rose 40 cents, or 0.6%, to settle at USD 72.25.

That was the highest close for both crude benchmarks since February 11.

“The market is trying to make up its mind on three bullish drivers: Russia, Iran and OPEC,” said BNP Paribas commodities strategist Aldo Spanjer. “People are trying to figure out the impact of announced and actual sanctions.”

Drone attacks on Russian oil infrastructure are reducing supplies.

Russia said Caspian Pipeline Consortium (CPC) oil flows, a major route for crude exports from Kazakhstan, were reduced by 30-40% on Tuesday after a Ukrainian drone attack on a pumping station. A 30% cut would equate to the loss of 380,000 barrels per day of market supply, Reuters calculations show.

Russian President Vladimir Putin suggested the CPC attack might have been coordinated with Ukraine’s Western allies.

In the US, cold weather threatened oil supply, with the North Dakota Pipeline Authority estimating production in the state would decline by as much as 150,000 bpd.

There is also speculation that the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia and Kazakhstan may decide to delay its planned supply increase in April, said IG market analyst Tony Sycamore.

US President Donald Trump denounced Ukrainian President Volodymyr Zelenskiy as “a dictator without elections” on Wednesday and said he should move fast to secure peace.

However likely a US-brokered peace deal between Russia and Ukraine may be, analysts at Goldman Sachs said any associated easing in sanctions against Russia is unlikely to bring a significant increase in oil flows.

“We believe that Russian crude oil production is constrained by its OPEC+ 9 million bpd production target rather than current sanctions, which are affecting the destination but not the volume of oil exports,” Goldman Sachs said in a report.

In the Middle East, Israel and Hamas will begin indirect negotiations on a second stage of the Gaza ceasefire deal, which could weigh on oil prices by reducing the risk of supply disruption.

Tariffs announced by the Trump administration could also dent oil prices by raising the cost of consumer goods, weakening the global economy and reducing fuel demand. Worries about European and Chinese demand are also helping keep prices in check.

Trump’s initial policy proposals have raised concern at the Federal Reserve about higher inflation, with firms telling the US central bank they generally expect to raise prices to pass through the cost of import tariffs.

The Fed uses higher interest rates to combat rising prices and inflation. So long as the Fed and other central banks keep interest rates higher for longer, borrowing costs will remain elevated, which can slow economic growth and demand for oil.

Separately, the market is waiting for US oil inventory data from the American Petroleum Institute (API) trade group later on Wednesday and the US Energy Information Administration (EIA) on Thursday.

Those reports will come out one day later than usual due to the US Presidents’ Day holiday on Monday.

Analysts forecast energy firms added about 2.2 million barrels of crude to US stockpiles during the week ended February 14. If correct, that would be the first time energy firms added crude into storage for four weeks in a row since April 2024.

(Reporting by Scott DiSavino in New York and Anna Hirtenstein in London; additional reporting by Arathy Somasekhar in Houston and Emily Chow in Singapore; editing by David Goodman Jan Harvey, David Gregorio, and Nia Williams)

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