Commodity wrap: oil rockets to 6-month high; gold above $5,000

Oil prices spiked on Thursday as tensions between the US and Iran intensified, raising fears about supply disruptions.

The price of West Texas Intermediate crude and Brent rose more than 1.5%.

Brent prices hovered around their August highs, while WTI hit a six-month high.

Meanwhile, gold prices reclaimed the crucial $5,000 per ounce mark as investors monitored economic data releases from the US.

Silver prices also rose slightly on the back of safe-haven demand from geopolitical tensions.

Despite thin trading volumes due to the Lunar New Year holiday, copper prices on the LME recovered from earlier weekly losses, moving back towards $13,000 per ton on Wednesday.

However, prices dipped below the mark on Thursday.

The three-month copper contract on the London Metal Exchange was last at $12,828 per ton, down 0.8%.

“Near‑term price action is likely to remain choppy, with elevated inventories capping upside even as prices stabilise,” Ewa Manthey, commodities strategist at ING Group, said.

“Further gains may require clearer signs of inventory drawdowns or stronger demand signals once Asian markets fully reopen.”

Oil hits multi-month highs

Growing concerns over a potential military conflict between the US and Iran drove oil prices higher on Thursday, as both nations escalated their military activity in the oil-producing Middle East.

Brent crude neared its highest price since last August, and WTI reached a six-month peak, following Wednesday's advance of over 4%.

WTI prices hit $66.56 per barrel, its highest level since August 9, while Brent came close to hitting a six-month high of $71.86 per barrel.

According to Saxo Bank analyst Ole Hansen, the recent escalation in prices points to an intensified geopolitical risk premium.

This is due to the world's most critical oil transit point, the Strait of Hormuz near Iran, once again being perilously close to conflict.

Approximately 20% of the world's oil supply flows through this strait.

Iranian state media indicated that the country temporarily closed the strait on Tuesday for several hours of military drills.

The reports did not confirm whether the waterway had been fully reopened. Additionally, the semi-official Fars news agency reported plans for a joint exercise on Thursday.

“With a deal looking increasingly difficult to reach, it also means it will be more challenging to find a route to de-escalation, especially following the US military build-up we have seen in the region,” Warren Patterson, head of commodities strategy at ING Group, said in a note.

“And if de-escalation is not possible, the key question will then be what type of action the US takes and how Iran responds to this,” Patterson said.

The US has deployed warships near Iran, with Vice President J.D. Vance stating Washington is considering ending diplomatic engagement with Tehran.

While some progress was made at the Geneva talks this week, the White House noted differences remain and expects more details from Tehran.

Gold and silver rebound

Gold and silver prices increased as investors kept an eye on US-Iran tensions.

Furthermore, a dip in US jobless claims, which indicated a stable labor market, all while anticipating inflation data scheduled for release later this week.

However, rising geopolitical tensions between the US and Iran overshadowed the hawkish tone from the Fed and robust economic data.

Prices were supported due to a rise in safe-haven demand for both gold and silver.

Meanwhile, Federal Reserve policymakers were united in their decision to keep interest rates unchanged, as indicated by the January minutes released on Wednesday.

However, they were divided on the future direction of policy: some were open to rate hikes if inflation remains elevated, while others favored cuts if price pressures ease.

This comes as Thursday’s economic data reinforces the labor market's strength.

US weekly jobless claims dropped to 206,000 in the week ending February 14, a figure significantly lower than the anticipated 225,000 and consistent with the robust non-farm payrolls report from the previous week.

Investors are now focused on the December Personal Consumption Expenditures (PCE) report, the Fed's preferred inflation metric, due on Friday.

This report is expected to provide further insights into the central bank's likely policy trajectory.

“Overall, gold continues to consolidate following its parabolic blow-off top and subsequent plunge. This consolidation is helping the daily MACD to pull back to more reasonable levels, having been very overbought,” said David Morrison, senior market analyst at Trade Nation.

“This looks like a positive development from a bullish perspective. However, the bulls should be concerned that gold has struggled to hold above $5,000 per ounce."

Silver remains vulnerable to further selling, despite its daily MACD, which had sharply dropped from extremely overbought levels, beginning to curl up.

This suggests initial upside momentum is building, a constructive sign for bulls, Morrison said.

At the time of writing, the gold contract on COMEX was at $5,033.70 per ounce, up 0.5%, while silver was at $78.495 per ounce, up 1.1% from the previous close.