According to a report from Benzinga, the United States Oil Fund (USO) is facing increased volatility due to geopolitical developments in Yemen and recent economic data from the United States.
The report highlights a victory by Iran-backed Houthi forces in the port city of Mokha, which investors view as a potential turning point in the civil war. The concern is that the Houthis may gain greater control over the Bab el-Mandeb Strait, a critical trade route for oil. As a result, WTI crude oil has spiked above $100 per barrel.
Simultaneously, the release of Consumer Price Index (CPI) data has influenced market expectations regarding Federal Reserve policy. Headline CPI came in at 0.4%, matching the consensus estimate, while Core CPI came in at 0.3%, slightly higher than the expected 0.2%. Following this release, Fed fund futures are now indicating an 88% probability of a rate hike when the Federal Reserve meets next week.
Despite these headwinds, the broader stock market is trading higher in early trading. This movement is attributed to investors positioning for a counterintuitive move after becoming overly negative ahead of the CPI release, as well as positive money flows into major technology stocks and ETFs.
