Crude oil increased 3.3% last week to $144.18 a barrel on speculation tension in the Middle East may get worse. The rise in energy prices, however, masked losses in base metals and some agricultural commodities. The price increases were supported by a fall in US crude stocks and a bullish report by the International Energy Agency. An easing in the dispute between Iran and western countries about Tehran’s nuclear programme on Friday triggered profit-taking.

Iran said it gave a ``constructive'' response to incentives intended to persuade the country to stop uranium enrichment. A compromise may allay concern that Israel is ready to attack Iran's nuclear installations, starting a conflict likely to cut supply from OPEC's second-largest oil producer.

Futures climbed to a record $145.85 a barrel yesterday on speculation tension in the Middle East may worsen. Crude oil for August delivery settled at $144.04 a barrel, while Brent crude oil for August settlement was at $144.42 a barrel. Futures climbed to $146.69 Thursday, a record intraday price. Brent traded higher than its U.S. equivalent for a third day, at a premium of 38 cents, on expectations that seasonal maintenance this month will curb output from North Sea fields.

Gold fell Thursday, but managed to close the week higher. Gold had its biggest gain this week on July 1 after ABC News reported Israel was likely to attack Iran, sending oil up as much as 2.4%. The metal has climbed 43% in the past year as the weaker dollar spurred demand for a hedge against declines in the U.S. currency against the euro. Gold for immediate delivery closed the week at $932.38 an ounce, gaining 0.5%.
All the base metals ended the week down, apart from aluminium, which rose 1.5% to $3,166 a tonne. Lead collapsed 12% on the week to $1,565 a tonne.

The euro fell against the dollar last week on bets a worsening economic outlook will deter the European Central Bank from increasing borrowing costs again. The 15-nation currency posted its first weekly decline since mid-June after ECB President Jean-Claude Trichet said he has ``no bias'' following the decision to raise the main refinancing rate by a quarter-percentage point to 4.25%. Speculation that he would signal more than one rate increase helped the euro trade as high as $1.5909 this week.

Trichet played down at a July 3 press conference the prospects of interest-rate increases, saying this week's quarter-point boost will help bring inflation back below the ECB's preferred limit of 2%. Trichet said he had ``no bias'' on further rate moves. European inflation accelerated to a 16-year high of 4% in May. Economic growth may weaken to 1.5% next year from 1.8% this year and 2.6% in 2007, according to ECB staff.

Growth in the countries that use the euro can improve in the fourth quarter after a slow expansion in the second and third, Trichet said July 3. Annual growth in German industrial production slowed in May to 3.5%, from 4.8% the prior month, according to the median forecast of analysts. It would be the slowest pace since August 2005.

Trichet's comments helped counter a Labor Department report showing U.S. employers eliminated jobs in June for a sixth consecutive month. Nonfarm payrolls fell by 62,000 last month, following a revised drop of 62,000 in May, the Labor Department said. The median forecast of economists was for a decline of 60,000. The jobless rate stayed at 5.5% after jumping in May by the most in two decades.
Japan's currency fell 2.8% last week against the South African rand and 0.4% versus the Australian dollar as confidence among Japan's largest manufacturers fell to a four-year low, encouraging investors to borrow in Japan and buy higher-yielding assets elsewhere. The Tankan index of manufacturer sentiment slid to 5 points in June from 11 in March, a third quarterly decline, the Bank of Japan said today in Tokyo. Japan's target lending rate of 0.5% compares with 12% in South Africa and 7.25% in Australia.