MARKET WRAPS

Stocks:

European shares were up while oil pulled back as investors remained on edge ahead of crucial inflation data later Friday.

Oil prices slipped in early trading, but were still headed for weekly gains of 10% after climbing back above $100 a barrel.

"Oil's resilience reflects a market now repricing both the duration and severity of the conflict, along with a clearer recognition of the mounting threat to regional supply," ING said.

The International Energy Agency said a recovery in Middle East oil flows is now expected to stretch into next year as escalating attacks on Gulf shipping and Houthi threats in the Red Sea keep key energy arteries under strain.

Eurozone government bond yields extended their rise in line with Treasurys as the selloff in global fixed income markets continued.

Investors were also awaiting Friday's U.S. consumer-price index for August, as it will be key in shaping market expectations for the Federal Reserve's policy meeting next week. The data won't reflect the recent run-up in energy prices, but a hot print will likely pile pressure on the Fed to act.

"If the Fed bypasses this month's meeting without announcing a rate hike, questions about the Fed's independence and the White House influence would return," potentially driving longer-dated yields higher still, Swissquote said.

Meanwhile, in the U.K., economic growth rose unexpectedly in July following a strong start to the year, with activity continuing to perform strongly despite the rise in energy prices.

U.S. Markets:

Stock futures were up as investors await the latest round of data on consumer inflation.

Analysts expect August's consumer price index, which is set to be released at 8:30 a.m. Eastern, to come in at 0.2% on a month-on-month basis, unchanged from July.

Forex:

The dollar traded steady as investors awaited the U.S. inflation data.

Sterling edged higher after the better-than-expected GDP data.

Bonds:

Eurozone government bond yields opened higher, taking the 10-year Bund yield to a new 15-year high.

Treasury yields rose in early trade, extending Thursday's gains and hitting new multiyear highs across maturities.

Commerzbank rates strategists confirmed their caution on bond duration. "The market is struggling to establish a new range, while oil prices stay under pressure and central banks stick with their laissez-faire attitude toward rising bond yields."

Energy:

Front-month Brent crude oil futures fell 2.1%, while front-month WTI crude oil futures dropped 1.7%.

Metals:

Gold prices were headed for a weekly loss of more than 2%, weighed down by surging oil prices, higher bond yields and rising rate-hike expectations.

Gold chart

Comex gold futures were likely consolidating above support at $4,300 per ounce, based on the daily chart, RHB Retail Research said.

Copper

Copper prices trimmed gains after surging this week to their highest level on record, with three-month futures on the LME now up 0.3% to $14,233 a metric ton. It had surged above $14,800 a ton in the previous session.

Iron ore

Iron ore was lower in early trade. It was weighed by expectations of weaker fundamentals despite some near-term support from steel mills' preholiday restocking, Baocheng Futures said.

EMEA HEADLINES

Orsted Gets Commission Backing in U.K. Tax Case

Orsted said an advisory commission has ruled that two of the Danish wind farm developer's British projects should be primarily taxed in the U.K., backing the company's position in a long-running dispute between Danish and U.K. tax authorities.

Orsted had asked authorities in Denmark and the U.K. to clarify taxation rights between the two countries in 2015, so that its Walney Extension and Hornsea 1 U.K. offshore wind farms wouldn't be double-taxed.

U.K. Economy Shows Continued Resilience in July

U.K. economic growth rose unexpectedly in July following a strong start to the year, with activity continuing to perform strongly despite a rise in energy prices due to the war in the Middle East.

Gross domestic product rose 0.4% at the start of the third quarter, following a rise of 0.3% in June, the U.K.'s statistics agency said Friday. This beat a consensus of economists polled by The Wall Street Journal, who expected flat growth.

Iranians Are Running Out of Gas as Economic Squeeze Takes Hold

Long lines at gas stations. Strikes by truckers. A government struggling to maintain the subsidies that had helped much of the population keep their heads above water.

The economic fallout from the war and the American blockade is adding to the pain facing ordinary Iranians who are already struggling with a plunging currency, worsening joblessness and rising prices for everything from food to trash bags.

Iran Is Producing Ballistic Missiles Again

Iran has resumed its production of ballistic missiles using stockpiled components and working in underground facilities, officials from the U.S. and Middle East familiar with the matter said, eroding what the U.S. and Israel have touted as a major achievement of the war.

Despite heavy attacks on its missile sites and industrial facilities during the initial phase of the war, Iran has been busy assembling liquid-propellant missiles, which have to be fueled just before launch, as well as solid-propellant missiles, which can be stored ready to fire, some of the officials said.

GLOBAL NEWS

U.S.-Iran Escalation to Delay Oil Flow Recovery Into Next Year, IEA Says

A recovery in Middle East oil flows is now expected to stretch into next year as escalating attacks on Gulf shipping and Houthi threats in the Red Sea keep key energy arteries under strain, the International Energy Agency said.

The energy watchdog-a group of Western nations and their allies-further cut its outlook for global oil demand, now expecting consumption to fall by 2.5 million barrels a day in 2026 to 102.4 million barrels a day, compared with its previous forecast for a 1.6-million-barrel-a-day decline.

Oil Prices Slip After Recent Surge Amid Supply Risks

Oil prices fell in early European trading Friday after surging in the previous session, as traders assessed growing risks to Middle East crude exports following fresh territorial gains by Iran-backed Houthi militants in Yemen.

Front-month Brent crude oil futures fell 2.1% to $105.36 a barrel, while front-month West Texas Intermediate crude oil futures dropped 1.7% to $100.69 a barrel. Both benchmarks settled Thursday at their highest closing levels since May 19, with Brent at $107.63 and WTI at $102.48.

The Unrelenting Bond Selloff Puts the 10-Year Yield on the Cusp of 5%

A monthslong selloff in government bonds is skidding into dangerous ground, pushing borrowing costs toward levels that some fear will finally damage the stock market and the economy.

Yields on U.S. Treasurys, which rise when bond prices fall, surged anew on Thursday, lifted by a new jump in oil prices, a firm wholesale inflation report and President Trump's promise to send $5,000 checks to Americans if Republicans keep control of Congress-a pledge that would add more than $1 trillion to the federal deficit.

Key Takeaways From Day Two of the Republican Midterm Convention

DALLAS-JD Vance delivered a fiery, future-looking speech on the second night of the GOP midterm convention that showcased the vice president's vision of America and will intensify speculation about his presidential aspirations.

The evening lacked the big surprises unveiled Wednesday night that included a video address by Democratic Sen. John Fetterman and President Trump's promise to pay Americans $5,000 if Republicans win in November. But it delivered poignant moments, as speakers and video tributes memorialized the anniversary of the assassination of Charlie Kirk and the Sept. 11 terrorist attacks. Two parents whose daughter was allegedly killed by an undocumented immigrant brought many in the audience to tears as they recounted their loss.

Iranians Are Running Out of Gas as Economic Squeeze Takes Hold

Long lines at gas stations. Strikes by truckers. A government struggling to maintain the subsidies that had helped much of the population keep their heads above water.

The economic fallout from the war and the American blockade is adding to the pain facing ordinary Iranians who are already struggling with a plunging currency, worsening joblessness and rising prices for everything from food to trash bags.

Pentagon in Talks to Get Into AI Infrastructure Funding With a $5 Billion Loan

The Pentagon is in talks to lend roughly $5 billion to AI cloud-computing startup Fluidstack, according to people familiar with the matter, adding the U.S. military to the growing list of financiers of artificial-intelligence infrastructure.

The money would come from the Pentagon's Office of Strategic Capital, which provides loans to companies working in areas deemed critical to U.S. national security. A $5 billion loan would be, by far, the office's largest to date.

Congress Is Suddenly Waking Up to the AI Doomsday Threat

WASHINGTON-A groundswell of urgency over artificial intelligence is surging in Congress amid growing fears that the technology could destroy civilization.

After years of limited actions, dozens of lawmakers are now touting new proposals to regulate artificial-intelligence models that have stepped up their capabilities.

Write to priscila.barrera@wsj.com