Commodity wrap: Oil spikes 3% on US-Iran tensions; gold slips 1%

Gold prices fell more than 1% as energy futures rose on the escalation in tensions between the US and Iran. 

Rising US Treasury yields and the dollar further weighed on gold and silver prices on Thursday. 

Oil prices jumped more than 3% as Iran’s supreme leader ordered that enriched uranium must remain inside the country. 

Among base metals, the aluminium contract on the London Metal Exchange was slightly higher, while the copper contract was down nearly 1%. 

Meanwhile, data from the International Aluminium Institute (IAI) showed that the average daily global primary aluminium output declined to 197,400 tons in April.

This compares with 201,700 tons a month earlier.

Oil spikes

The West Texas Intermediate crude contract rose 3.4% to $101.57 per barrel, while international benchmark Brent advanced about 2.7% to $107.76.

The rally followed reports from Reuters that Ayatollah Mojtaba Khamenei had instructed Iran’s leadership not to ship enriched uranium abroad, a position that directly challenges US demands for dismantling Tehran’s nuclear program.

US President Donald Trump has repeatedly said that curbing Iran’s nuclear ambitions is a central objective of the ongoing conflict.

Earlier this week, he paused imminent airstrikes at the request of Gulf Arab allies, citing a desire to give diplomacy more time. 

But on Wednesday, Trump warned that military action could resume if Iran fails to provide what he called “100% good answers” in negotiations.

“The oil market remains overly sensitive to Iran-related headlines, with participants continuing to pin considerable hope on reports that talks between the US and Iran are progressing,” Warren Patterson, head of commodities strategy at ING Economics, said in a note. 

Since agreeing to a fragile ceasefire last month, Washington and Tehran have made little progress toward a comprehensive deal.

Iran’s refusal to export enriched uranium is viewed as a major obstacle, raising doubts about whether negotiations can succeed. 

Analysts say the standoff increases the likelihood of prolonged volatility in energy markets, with prices swinging sharply on every diplomatic headline.

Gold declines 1%

Gold prices slipped 1% on Thursday as rising oil costs intensified inflation concerns, fueling expectations of US interest rate hikes and driving Treasury yields and the dollar higher, which in turn weighed further on bullion.

The yellow metal has now lost over 15% since the outbreak of the US-Iran war in late February, a conflict that has disrupted shipping through the Strait of Hormuz, lifted energy prices, and stoked fears of broader inflation.

The dollar index rose, making gold—which is priced in the greenback—more expensive for holders of other currencies on Thursday. Meanwhile, yields on the US 10-year Treasury note resumed their climb, increasing the opportunity cost of holding non-yielding assets such as bullion.

Although gold is traditionally viewed as a hedge against inflation, it tends to struggle during periods of elevated interest rates. 

Traders are now pricing in a 58% chance of at least one 25-basis-point hike by the Federal Reserve this year, up from 48% a day earlier, according to CME’s FedWatch Tool.

In short, the combination of stronger oil prices, heightened inflation risks, and rising expectations for Fed tightening has left gold under renewed pressure, underscoring the challenges facing the metal in a high-rate environment.

At the time of writing, the COMEX gold contract was at $4,509.90 per ounce, down 1.0%, while silver was 2.3% lower at $75.695 an ounce.