While Iran Threat Keeps Oil Elevated, U.S. Stocks and Dollar Slip

July 1, 2008

Oil continues to trade near elevated levels (above $143 as at the time of writing) on Iranian verbal threats, and the Dow Jones Industrial Average is down more than 130 points. Iranian Deputy Oil Minister was reported as saying Iran is ready to repel any attack, and said that an attack would disrupt oil exports and disrupt the entire oil industry in the Middle East. Middle East tensions are at the forefront again. Meanwhile, OPEC president said that oil prices reflect war risk, and to keep oil prices down, the US needs to stabilise the US dollar.

For the dollar to be stabilized, that’s not an impossible task. Further dollar decline could be prevented if traders can see a commitment by the Fed to fight rising inflation, but alas, the Fed thinks that inflation is likely to moderate later this year.

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