Commodity wrap: Oil slumps over 3% as Iran-Israel pause attacks; gold falls

Oil prices plunged more than 3% on Tuesday as Iran and Israel announced a halt in attacks, thereby easing tensions in the Middle East. 

Gold prices were largely unchanged after slipping to a two-and-a-half month low in the previous session. Silver also continued its fall below $70 per ounce. 

Meanwhile, copper on the London Metal Exchange rose more than 1% as optimism over de-escalation in Middle East tensions boosted sentiments. 

At the time of writing, the three-month copper contract on LME was at $13,756.13 per ton, up 1.1%, while aluminium was 0.7% down at $3,569 per ton. 

Oil slips

Oil prices slipped on Tuesday, giving back the gains from the previous session after Iran and Israel announced they had paused attacks following an appeal from US President Donald Trump.

Both sides, however, warned that hostilities could resume at any time.

The renewed Israeli strikes on Iran and attacks in Lebanon over the weekend had driven prices up by about 5% on Monday. But with no fresh catalysts, crude retreated once the announcement of a halt in fighting came through.

Brent crude oil was last at $90.96 per barrel, down 3.4%, while West Texas Intermediate plunged 4% to $87.62 per barrel.

Tehran has continued to block most shipping through the Strait of Hormuz, a vital waterway that, before the war, carried around one‑fifth of the world’s crude oil and liquefied natural gas. 

Washington has imposed its own blockade of Iranian ports, further tightening flows.

On Monday, US forces disabled an oil tanker in the Gulf of Oman after it attempted to sail to an Iranian port in violation of the blockade, according to the US military.

Adding to the downward pressure was weaker demand from China. Imports of crude fell 29% last month to their lowest level in eight years. 

In April, shipments had already dropped to a multi‑year low of 9.3 million barrels per day, down sharply from an average of 11 million barrels per day before the US‑Israeli war on Iran.

Refiners in the world’s largest oil‑importing nation have been drawing on reserves to offset the decline.

Gold falls

Despite rising for a brief period earlier on Tuesday, gold could not defend its gains. Prices slipped again and extended losses from the previous session. 

Earlier in the day, the US dollar index slipped 0.3% against major peers, making gold priced in dollars more attractive to buyers using other currencies.

Meanwhile, developments in the Middle East raised hopes of a peace deal, pushing oil prices lower after Iran and Israel announced they had paused attacks following an appeal from US President Donald Trump. 

Softer oil prices could ease inflation concerns, potentially opening the door for central banks to cut interest rates and boosting the appeal of non-yielding gold.

After last week’s strong jobs report, investor attention has shifted to key inflation readings, including the May US Consumer Price Index due Wednesday and the Producer Price Index on Thursday, which will provide further clues on the Federal Reserve’s policy outlook.

According to CME’s FedWatch tool, traders are currently pricing in about a 70% chance of a US rate hike in December.

“Should the US inflation data for May also surprise on the upside on Wednesday, the gold price is likely to fall further,” Carsten Fritsch, commodity analyst at Commerzbank AG, said in a report. 

At the time of writing, the gold contract on COMEX was at $4,350.10 per ounce, down 0.3%, while silver was 1% down $67.905 an ounce.