Commodity wrap: Brent rebounds on Iran strikes as gold reverses early losses

Brent crude oil jumped nearly 4% on Tuesday, rebounding from sharp losses in the previous session as uncertainty about a potential peace deal between the US and Iran remained. 

Gold fell more than 1% on Tuesday as expectations of higher interest rates dominated the market.

However, prices were nearly flat at the time of writing as the precious metal reversed early losses. 

Meanwhile, silver gained on Tuesday, trading near $77 per ounce. 

Brent surges, WTI falls

Brent crude rose more than 3% on Tuesday after US forces carried out strikes in Iran, deepening uncertainty over whether a deal to end the war and reopen shipping flows through the Strait of Hormuz is close.

US Secretary of State Marco Rubio said negotiations with Tehran could “take a few days,” dampening hopes for an imminent breakthrough just a day after Washington described its military action in southern Iran as defensive.

The global benchmark Brent was up $3.49, or 3.8%, to $96.94 a barrel, rebounding after a 7% drop on Monday.

US West Texas Intermediate was down $2.75, or 2.9%, from Friday’s close at $92.82, with no settlement on Monday due to the Memorial Day holiday.

"While differences between the parties have narrowed, any eventual peace deal would likely lead only to a gradual reopening, meaning ​the current tight supply outlook could take months to normalize," Ole Hansen at Saxo Bank was quoted in a Reuters report.

Tehran has effectively blocked nearly all non‑Iranian shipping into and out of the Gulf via the Strait of Hormuz since the war began, choking off about one‑fifth of global oil and liquefied natural gas flows.

The strikes coincided with talks in Doha, where Iran’s top negotiator and foreign minister met Qatar’s prime minister to discuss a potential deal with the US.

Both sides said progress had been made on a memorandum of understanding that would halt the war and give negotiators 60 days to finalise an agreement.

According to Nikkei, citing a Middle East diplomatic source, Iran would clear mines from the Strait within 30 days under the proposed deal, allowing vessels from all countries to navigate freely and safely.

Tehran would also end transit‑fee collection.

Ship‑tracking data showed three LNG tankers recently passed through the Strait, bound for Pakistan, China, and India, along with a supertanker carrying Iraqi crude to China that had been stranded for nearly three months.

Meanwhile, US President Donald Trump reiterated on Monday his demand that Iran hand over its enriched uranium so it could be destroyed.

Gold steady

Gold had dropped more than 1% earlier on Tuesday as investors bet on higher US interest rates this year.

The decline came against the backdrop of US military strikes in Iran, which dampened hopes for a peace deal, lifted oil prices, and reignited inflation concerns.

However, prices have reversed the losses and were largely flat at the time of writing.

The COMEX gold contract was last at $4,549 per ounce, down just 0.1%, while silver was at $76.540 an ounce, up 0.5%.

Kevin Warsh was sworn in as Federal Reserve chief on Friday, taking over leadership of the US central bank amid mounting expectations of tighter global monetary policy.

Markets are currently pricing in a 25‑basis‑point Fed rate hike in December.

Although gold is traditionally seen as an inflation hedge, the non‑yielding asset tends to struggle in a high‑rate environment.

Adding to inflation worries, Brent crude rose more than 3% as uncertainty persisted over whether a US–Iran peace deal would be reached to reopen shipping flows through the Strait of Hormuz.

Higher crude prices typically feed into inflation as manufacturers pass on increased costs to consumers.

Meanwhile, UBS cut its year‑end gold price target by $400 to $5,500, citing persistent risks from higher yields and a stronger dollar.