Middle East jitters boost crude, tilt dollar as Fed minutes loom

Crude oil held its premium on Wednesday as Middle East tensions kept a bid under energy markets while traders turned attention to the Federal Reserve's June meeting minutes due later in the session.

Brent crude hovered near recent highs after a series of escalatory statements from regional powers over the past 48 hours. The risk premium in oil has widened the spread between short-dated and longer-dated crude futures, a structure traders associate with supply-disruption hedging rather than genuine demand optimism.

The dollar index edged higher through the European morning, driven by the energy-linked currency bloc bid as much as by any shift in rate expectations. The euro gave back some of its overnight gains against the dollar as the energy price impulse pushed the pair back toward $1.0680. Sterling held near $1.2640, supported by a lighter-than-average positioning unwind ahead of the minutes.

The Fed's June meeting minutes, due at 1800 GMT, are the next scheduled catalyst for rate-path repricing. The market currently prices about 40 basis points of cuts over the remaining 2024 meetings. A tone that acknowledges the resilience of economic activity without closing the door on accommodation would likely reinforce that backdrop. A hawkish lean – particularly on the persistence of services inflation – would push short-dated yields higher and strengthen the dollar into the New York close.