Commodity wrap: Oil plunges to 3-month low on US-Iran deal; gold up

Oil prices plunged more than 4% on Tuesday to a fresh three-month low on growing expectations that the US and Iran would agree to end the war. 

The price of West Texas Intermediate crude fell to a three-month low of $76.59 a barrel, while Brent dipped to $79.51 per barrel.

Meanwhile, gold prices rose slightly on hopes that the US Federal Reserve would refrain from hiking interest rates. 

Higher interest rates increase the opportunity cost of holding gold as it is an unyielding asset. 

Oil slumps

Brent crude fell sharply on Monday, putting it on track for its lowest close since March 2 and leaving it in technically oversold territory for a third consecutive session, the first time since October 2025. 

West Texas Intermediate was also headed for its weakest finish since March 4.

Before the Iran war erupted on February 28, both benchmarks had been trading comfortably in the $65–$70 range.

Prices sank nearly 5% after US President Donald Trump announced an interim deal to end the US–Israeli war with Iran. But by Tuesday, doubts were mounting. 

Analysts warned that shipping traffic and energy exports could take weeks to recover, with details of the agreement still undisclosed.

The deal extends a fragile ceasefire announced in April by another 60 days and reopens the Strait of Hormuz, which Iran has effectively blocked since the conflict began.

Roughly 20% of global oil supplies passed through the strait before the war. 

The preliminary agreement prompted investment banks, including Goldman Sachs, Morgan Stanley, and Citi, to lower their oil price forecasts.

Other pressures weighed on crude as well, with concerns about China’s economy, rising global inflation and interest rates, and US calls for peace between Russia and Ukraine.

China’s economy showed increasing unevenness in May, with crude throughput falling 9.1% year‑on‑year to its lowest level in nearly four years.

Trump, after meeting Ukrainian President Volodymyr Zelenskiy alongside Group of Seven leaders, said Russia should make peace with Ukraine and pledged to help.

A settlement could lead to sanctions being lifted, allowing Moscow, the world’s third‑largest crude producer in 2025 behind the US and Saudi Arabia, to export more oil.

In the US, most global brokerages now expect the Federal Reserve to hold interest rates steady for the rest of 2026, reversing earlier expectations of cuts. 

Elevated inflation risks and a resilient labor market have shifted policy outlooks. Meanwhile, the Bank of Japan raised rates to a 31‑year high on Tuesday.

Gold rises

Gold prices climbed more than 1% on Tuesday as expectations for a US Federal Reserve rate hike this year eased, following an interim US–Iran peace deal that pushed oil prices lower and reduced inflation concerns.

At the time of writing, the gold contract was at $4,366.51 per ounce, up 0.3%, while silver was at $70.365 an ounce, up 0.3% from the previous close, as per data from commodity trading platforms.

The agreement, announced by President Trump, would extend the fragile ceasefire reached in April by another 60 days and reopen the Strait of Hormuz, which Iran has kept blocked since February when fighting with the US and Israel began.

Brent crude futures dropped below $80 a barrel for the first time since early March, after sinking nearly 5% on Monday in reaction to the deal. 

Markets have since pared back the probability of a Fed rate hike in December to 60% from around 70%, according to the CME FedWatch tool.

Bullion has been under pressure since the onset of the US–Israeli war against Iran, as surging oil prices fueled expectations of prolonged high interest rates.

Despite its role as an inflation hedge, gold struggles in a high‑rate environment because it offers no yield.

Investors are now awaiting a series of central bank meetings this week, including the Fed’s rate decision on Wednesday, the first under new Chair Kevin Warsh.

“As a non-interest-bearing asset, gold is benefiting from this revised assessment, after having previously come under pressure due to the pricing in of interest rate hikes,” Carsten Fritsch, commodity analyst at Commerzbank AG, said in a report.