West Texas Intermediate (WTI) crude oil extended its decline for a second consecutive day on Friday, trading around $82.90, as investors unwound defensive positions following fresh signs of easing tensions in the Middle East [1]. According to a Bloomberg report cited in both articles, officials from the United States, Iran, and the Group of Seven (G7) believe an agreement aimed at reopening the Strait of Hormuz could be signed as early as this weekend in Geneva, with a memorandum of understanding likely to be adopted initially before a final agreement is reached [1][2]. US President Donald Trump stated that a peace agreement with Iran could be finalized within the coming days, and Iranian media reports indicate Tehran is expected to support the proposed text after Washington accepted several conditions put forward by Iran [1].
The prospect of reopening the strategic shipping route is weighing on crude oil prices by reducing concerns about prolonged disruptions to global energy supplies. The Strait of Hormuz is a critical transit point for crude oil and liquefied natural gas (LNG) exports from the Middle East to international markets [1][2]. Maritime tracking data show several LNG tankers have already departed the area heading toward Asia, suggesting operators are beginning to anticipate improved navigation conditions [1]. This week's sharp decline in oil prices reflects a rapid unwinding of the geopolitical risk premium that had supported oil prices in recent weeks [1].
Gold prices (XAU/USD) held onto Thursday’s strong recovery move, trading near $4,220 during the European session on Friday, amid intensified hopes that the US and Iran will sign a Memorandum of Understanding by the weekend [2]. The gold price had underperformed in recent months as oil prices rallied due to the Hormuz closure, which led global inflation higher and forced traders to price out dovish expectations for global central banks [2]. Theoretically, easing dovish expectations for central banks bode poorly for non-yielding assets such as gold [2].
Technically, XAU/USD trades firmly near $4,215.34 but maintains a bearish near-term bias as spot holds well beneath the 20-day Exponential Moving Average (EMA) at $4,398.58. The Relative Strength Index (14) near 36 stays in bearish territory but above oversold, hinting that downside pressure is present yet not exhausted [2]. The 20-day EMA at $4,398.58 is the first meaningful resistance, while the psychological level of $4,000 is immediate support. A downside move below $4,000 would open the door for further downside towards $3,900 [2].
Despite optimism regarding the US-Iran deal, some market participants remain cautious, noting that a full normalization of energy flows could take time due to the need to secure shipping lanes, restore infrastructure, and bring production facilities affected by recent regional tensions back online [1]. Investors are now awaiting official confirmation of the agreement, which could further strengthen expectations for normalization of global energy flows [1].
CONCLUSION
The anticipation of a US-Iran agreement to reopen the Strait of Hormuz has led to a sharp decline in oil prices and a corrective move in gold, reflecting a rapid unwinding of geopolitical risk premiums. While optimism prevails, some caution remains as full normalization of energy flows may take time. Market participants are closely watching for official confirmation, which could further impact both energy and precious metals markets.