Oil and gold markets experienced significant moves following renewed optimism over US-Iran peace negotiations. President Donald Trump stated on Monday that talks with Iran were 'proceeding nicely,' raising hopes for an interim deal to extend the ceasefire and potentially reopen the Strait of Hormuz, a critical chokepoint for global oil supply [1][2][3]. Trump also urged Saudi Arabia, Qatar, Pakistan, Turkey, Egypt, and Jordan to join the Abraham Accords and establish diplomatic relations with Israel amid ongoing negotiations with Iran [1][3].
Crude oil prices responded sharply to these developments. International benchmark Brent futures fell about 7% to close at $96.14 per barrel, while West Texas Intermediate (WTI) futures dropped more than 6% to $90.30 per barrel, with some reports citing a 5.61% decline to $90.99 per barrel as of 7:37 p.m. ET [2][3]. The decline in oil prices was attributed to the prospect of a deal that could end the three-month-long war and reopen the Strait of Hormuz, which has been under a de facto Iranian blockade since early March, severely disrupting global oil exports [3].
Gold prices edged higher, with XAU/USD gaining ground to near $4,575 during the early Asian session on Tuesday. The precious metal benefited from the weakening US Dollar, as hopes for a US-Iran deal weighed on oil prices and, by extension, inflation expectations. Tim Waterer, chief market analyst at KCM Trade, noted that the prospect of a deal has given gold a 'welcome lift from an inflation perspective' [1].
Market sentiment was further buoyed in Asia-Pacific equities, with futures pointing to higher openings. Japan's Nikkei 225 futures indicated a rise, with the Chicago contract at 65,290 and Osaka at 65,460, compared to the previous close of 65,158.19. S&P 500 futures gained 0.78%, Nasdaq-100 futures advanced 1.14%, and Dow Jones Industrial Average futures rose by 371 points, or 0.73% [2]. However, the Hang Seng index futures were slightly lower than the previous close [2].
Despite optimism, the situation remains fluid. The US and Israel still need to finalize critical details, such as free passage for ships through the Strait of Hormuz and the timeline for unfreezing billions of dollars in Iranian funds [1]. Trump warned that the US could resume attacks if talks fail, stating, 'It will only be a Great Deal for all or, no Deal at all' [3]. Meanwhile, the US Central Command reported conducting 'self-defense strikes' against Iranian missile sites and boats, highlighting ongoing tensions [2].
CONCLUSION
The prospect of a US-Iran peace deal has triggered a sharp decline in oil prices and a modest rise in gold, reflecting shifting inflation expectations and improved risk sentiment. While markets are optimistic, the outcome remains uncertain as key details of the agreement are yet to be finalized and military tensions persist. Investors are closely watching further developments, with upcoming US inflation data also in focus.