A broader downturn in financial markets also affected crude prices at the beginning of August, as US jobs growth slowed significantly, which combined with weak manufacturing data contributed to fears of a potential US recession. This pressured the price to drop from $79.5/bbl to around $76.3/bbl, a level not seen since January. This added to existing concerns over Chinese oil consumption which had pressured prices over the previous month, pointing to a weak global demand outlook. Marathon announced plans to run its 13 refineries at 90% capacity on average in Q3, down from 97% in Q2, highlighting such fears. Brent crude futures saw a rebound towards mid-month, as political tensions flared in the Middle East, with Israel and Hezbollah stepping up its confrontation and hopes for a ceasefire in Gaza were tempered as Hamas refused to return to the negotiating table at a fresh round of talks aimed at achieving a deal. On the demand side, prices were supported as data from the International Energy Agency (IEA) showed that the US oil market entered a deficit in June thanks to summer driving demand in the short term, however OPEC revised its demand growth figure for 2024 down to 2.1 million barrels on weak demand in China. After reaching $82.3/bbl, Brent began to slide once again. Data showed that OPEC overproduction continued in July despite members vowing to compensate, with Iraq pumping 170,000 bpd above its quota according to Reuters. Furthermore, sentiment on both 2024 and 2025 looked weak, as Morgan Stanley slashed its demand growth forecast, citing China as the primary factor. After falling to $76.1/bbl, an eight-month low, a large airstrike on Israel by Hezbollah prompted supply fears which have been building since the assassination of a senior commander in Beirut during July, although both parties appeared to step back from an all-out war. Escalating tensions, the prospect of Federal Reserve rate cuts, and a weak dollar supported prices, while demand concerns weighed, sending Brent to finish around $78.9/bbl for August following a volatile month.

Beginning August trading at $1.279 against USD, the fears of a US recession pressured UK bond markets, weighing on the pound. However, after reaching a monthly low of $1.271 early in the month, sterling enjoyed a strong upwards trend for the remainder of August. Bank of England governor Andrew Bailey warned against cutting rates “too quickly, or by too much”, boosting the pound. Despite the downward trend for inflation generally, in the service sector it continues to exceed 5%. Meanwhile, weak US data led to 3 Federal Reserve rate cuts being priced in for the remainder of 2024, causing a potential disparity in monetary policy moving forward. The pound rose to $1.285 by mid-month, as annual inflation rose to 2.2% in the UK, around expected levels and back above the Bank of England’s 2% target. Market predictions on the direction of travel for Federal Reserve policy were confirmed by chairman Jay Powell’s keynote address at the Jackson Hole Economic Symposium, who stated that “the time has come” to lower interest rates. Following the speech, a 25 basis point cut at the Fed’s September meeting was fully priced into swap markets, with a growing number of commentators wary to rule out the possibility of a larger 50 basis point reduction. Furthermore, sterling was boosted by strong PMI data, growing at the fastest pace in four months and beating expectations. This pointed to some resilience in the UK economy which led the pound to rise to a high of $1.326, a level not seen since March 2022, before a slight correction to finish the month at $1.319.

Developments in the Middle East during August were underpinned by the death of Hezbollah commander Fuad Shujr in an Israeli airstrike in Beirut at the end of the previous month, with markets focused on Hezbollah’s response. Hostilities between both Israel and Hezbollah continued throughout the month, including multiple rocket attacks which stoked fears that a broader conflict could develop. The UN has urged for calm, and the US has said it is working to avoid a further escalation, with both sides said to wish to avoid and all-out war. Following the death of Hamas’s political leader Ismail Haniyeh at the end of July, the fresh round of ceasefire talks which began mid-month were not attended by Hamas, dashing hopes that a deal will be found in the short term despite a concerted effort by mediators, including the United States. In the US, Kamala Harris was officially nominated by the Democrats at their national convention, who is currently enjoying a slender lead in the polls after a positive upwards trend. Independent candidate Robert F Kennedy Jr has suspended his campaign, removing his name from the ballot in 10 swing states and endorsed Donald Trump, which may give the former president a boost in these crucial battleground states. Tensions have also risen in Ukraine, as troops staged a counter-offensive into Russia’s Kursk region. Around 200,000 people have been evacuated from affected areas, with Ukrainian soldiers advancing up to 18 miles into Russian territory. In response Russia has launched a ‘massive’ airstrike on Ukraine’s energy infrastructure, causing widespread blackouts and six civilian deaths thus far. The escalation has led to an emphasis on EU countries accruing high levels of gas storage, as it anticipates the potential stoppage of Russian deliveries via Ukraine.