Commodity wrap: WTI surges on Trump's Hormuz deadline; gold flat

Oil prices were mixed on Tuesday with Brent steady, while the West Texas Intermediate crude rose sharply ahead of a deadline set by the US President Donald Trump for Iran to open the Strait of Hormuz or be ready for severe consequences. 

Gold prices remained steady throughout most of the day as the market monitored the situation in Iran amid Trump’s threats. 

Meanwhile, base metal prices were mostly mixed as well. Aluminium and copper prices on the London Metal Exchange were flat, while zinc rose. 

Oil prices mixed

Oil prices showed mixed movement on Tuesday, with Brent futures largely flat, but US crude was poised for its highest closing price since 2022. 

This movement occurred as a deadline approached for Iran, set by US President Trump, to open the Strait of Hormuz or face military action targeting power plants and other infrastructure.

WTI typically trades at a discount to Brent. However, this dynamic has recently reversed, with barrels for earlier delivery commanding a premium. 

Specifically, the benchmark WTI contract is currently for May delivery, while the Brent contract is for June.

WTI is set to close at its highest level since June 2022 for the fourth consecutive day. This follows Brent's performance at the end of March, when its front-month contract (then May delivery) also closed at its highest price since June 2022.

The premium of the WTI front-month over the second-month was set to achieve a record high for the third consecutive day.

“Brent traded above $111/bbl in Tuesday’s morning session, while WTI was around $116/bbl after it closed at its highest since June 2022,” Warren Patterson, head of commodities strategy at ING Group, said in a note.

Since late February, the Strait of Hormuz closure has halted most shipping, causing a large tanker backlog. This has severely cut off global, especially Asia-Pacific, access to crude oil, LNG, and critical chemicals for fertiliser and semiconductor production.

Trump issued a stark warning, stating that "a whole civilisation will die tonight," as Iran failed to comply with his ultimatum to open the Strait of Hormuz. 

Trump issued an 8 P.M. Washington/3:30 A.M. Tehran deadline for Iran to end its Gulf oil blockade, threatening to destroy all Iranian bridges and power plants. Iran warned it would retaliate against US Gulf allies, whose cities rely on power and water.

This critical waterway is responsible for transporting roughly 20% of the world's oil and liquefied natural gas.

“The longer the Strait of Hormuz remains closed, the worse the economic damage,” said David Morrison, senior market analyst at Trade Nation. 

The price of WTI was last at $114.92 per barrel, up 2.3%, while Brent was largely flat at $110 per barrel. 

Gold flat

Gold prices remained relatively flat on Tuesday amid cautious market sentiment that was primarily driven by the approaching deadline set by Trump for Iran to either reopen the Strait of Hormuz or face the threat of severe strikes on its infrastructure.

Gold has shown a modest recovery on Tuesday, maintaining a position above $4,600 per ounce. Although it spiked briefly to $4,800 last Thursday, hitting a two-week high, the price subsequently tumbled to $4,550 within hours. 

The current rally lacks significant momentum, suggesting continued investor skepticism about a sustained move toward higher prices.

“Yet the daily MACD has turned up from relatively oversold levels, and this may give the bulls some confidence,” Trade Nation’s Morrison said. 

Market attention is currently fixed on upcoming US economic data, including the minutes from the Federal Reserve's March meeting, set for release on Wednesday. 

Further key reports expected are the US Personal Consumption Expenditures data on Thursday and the Consumer Price Index on Friday.

In international news, China's central bank has extended its streak of gold purchases, marking the 17th consecutive month of accumulation, according to recent data.

Rate cuts are now off the table for this year because markets are reacting to renewed inflationary pressures, which have recently been amplified by rising oil prices.

This looks likely to provide a bit of a headwind in the near term. Last week's strong Nonfarm Payrolls report also reinforced expectations that the Federal Reserve could keep rates higher for longer.

At the time of writing, the price of gold was at $4,681.75 per ounce, largely unchanged, while silver was at $71.905 per ounce, down 1.3% from the previous close.