Oil prices surged as a key Saudi Arabian pipeline outage and Libyan field shutdowns added new supply risks to a market already tightened by losses from the Iran conflict. Gold traded in a narrow range, with elevated energy costs stoking inflation worries and keeping traders positioned for a Federal Reserve rate hike this week. Copper advanced as investors weighed signs of easing supply tightness against expectations for the central bank's first rate increase in three years.

Crude Rises as Saudi Pipeline Halt and Libyan Shutdowns Create Supply Concerns

Oil climbed sharply as the disruption to a vital Saudi pipeline and halted Libyan production introduced fresh supply threats, compounding existing tightness from Iranian supply losses tied to the war. Global benchmark Brent crude settled nearly 3% higher at around $109 per barrel, while West Texas Intermediate advanced over 4% in choppy trading, highly sensitive to headlines from the Middle East and the Russia-Ukraine conflict. Diesel futures settled at a record high. Traders are seeking clues on how long the Saudi East-West pipeline, closed after a drone attack last week, will remain offline. Sources indicate Saudi Aramco is delaying crude deliveries to some European clients this month.

U.S. Energy Secretary Chris Wright said on Tuesday the pipeline disruption would be measured in "days," reiterating it could resume "very quickly." Saudi Arabia has not specified a restart timeline, while the UK reportedly fears the line may remain largely shut for six weeks. Bloomberg Intelligence analysts noted the outage is testing the limited spare capacity in the global oil market. "Wright's suggestion of days rather than weeks trims upside, but the market is focused on actual barrels, not rhetoric," said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. "For now, physical tightness is overshadowing efforts to soothe supply concerns." Meanwhile, the closure of the Hamada-Zawiya pipeline has forced Libya to shutter several fields and could lead to a force majeure declaration on crude output.

Brent futures are up roughly 75% this year, with persistent Middle East instability and the Russia-Ukraine conflict amplifying inflationary pressures, pushing 10-year U.S. Treasury yields to their highest since 2007. "Markets have been gradually pricing in the likelihood of a prolonged conflict since late July, and that seems to be becoming the consensus," said Walt Chancellor, energy strategist at Macquarie, in a note. Dated Brent, the main pricing benchmark for physical crude, rose above $130 a barrel this week for the first time since April, as European buyers scrambled for alternative supplies following the Saudi pipeline closure. U.S. Senate Majority Leader John Thune expressed openness to discussing a diesel export ban to lower domestic prices, sending diesel futures to session highs, though experts suggest such a policy could actually push prices higher. Brent November settlement gained 2.9% to $108.75 a barrel, while WTI October settlement rose 4.4% to $105.83.

Copper Gains as Traders Assess Inflow Data and Fed Rate Path

Copper prices advanced as investors weighed signs of easing supply tightness alongside market bets on the Fed's first rate hike in three years. London Metal Exchange copper futures rose 0.6% on Tuesday, settling at $14,083.50 per metric ton, after retreating sharply from record highs reached last week. Earlier, traders had shipped copper to the U.S. on expectations of new import tariffs on refined metal, tightening supply elsewhere, though no such measure has yet been implemented. On Monday, LME warehouse copper inflows hit their highest in nearly four weeks. The three-month contract traded at a premium of $86.75 over cash copper, often signaling ample supply, but that narrowed to $62.53 on Tuesday. Attention is also on the upcoming Fed meeting, with a rate hike expected—a move typically bearish for non-yielding assets like commodities. LME copper rose 0.6% to $14,083.50 a ton, aluminum gained 0.2% to $3,251.50, zinc added 0.8% to $3,824, tin climbed 0.2% to $51,966, while nickel fell 2.2% to $15,977 and lead slipped 0.4% to $1,873.50.

Gold Holds Near $4,300 as Traders Await Fed Decision

Gold fluctuated as high energy prices fueled inflation concerns, keeping traders positioned for a Fed rate increase this week. Bullion edged up 0.2% to just above $4,300 an ounce. Surging oil prices have intensified inflation worries and pushed bond yields higher, with traders currently pricing in roughly a 95% probability of a rate hike on Wednesday. Higher borrowing costs typically weigh on gold, which pays no interest. "Gold is nearing some technical levels that, if broken, could prompt funds to turn net short before the Fed's decision," said Ryan McKay, senior commodity strategist at TD Securities. He added that any short-term weakness should be viewed as a potential buying opportunity, given lingering long-term supports such as central bank purchases and dollar depreciation risks. At 3:02 PM in New York, spot gold was at $4,306.57 an ounce, having dipped as much as 0.9% earlier in the session. Silver rose 1% to $63.88 an ounce, while platinum and palladium also advanced.