Oil prices advanced as the latest developments between the US and Iran intensified concerns over escalating tensions. Copper prices recovered, while gold and silver rebounded as bargain-hunting flowed into the precious metals market.
Oil: WTI Rises as US-Iran Tensions Escalate, Boosting Risk Premium Crude oil prices climbed as military forces from the United States and Iran appeared to confront each other in maritime and aerial domains, heightening worries about a potential escalation.
WTI settled above $63 per barrel after an Iranian drone approached a US aircraft carrier in the Arabian Sea and was shot down. This incident revived a portion of the geopolitical risk premium that had previously faded as Washington softened its stance toward Tehran.
White House Press Secretary Caroline Levitt stated that US President Donald Trump wishes to prioritize diplomacy in handling relations with Iran, causing crude futures to pare some of their gains. However, in post-settlement trading, oil prices moved higher, at one point rising by 3.3%.
Just hours earlier, a tanker participating in the US military's fuel procurement program was hailed by several small armed vessels while transiting the Strait of Hormuz, indicating a renewed increase in risks for maritime traffic in the region.
Gregory Brew, a geopolitical analyst at Eurasia Group, noted that these events highlight that the US's recent shift toward diplomacy with Iran is not driven by a desire to ease tensions, but rather by an assessment that it holds sufficient leverage to force Tehran into concessions on the nuclear deal and other demands. He estimates that current oil prices contain a risk premium of $3 to $5.
WTI March futures rose 1.7%, settling at $63.21 per barrel; Brent April futures settled 1.6% higher at $67.33 per barrel.
Base Metals Copper prices rebounded as a sell-off in metals, led by silver and gold, began to abate.
Copper on the London Metal Exchange (LME) surged as much as 4.9% to $13,526 per metric ton. Other base metals on the LME also trended higher.
At the close, LME copper futures were up 4.6% at $13,478/ton; LME aluminum futures rose 1.7% to $3,106.5/ton; LME nickel futures gained 3.7% to $17,447/ton; LME zinc futures increased 0.5% to $3,338.5/ton; LME tin futures jumped 7.6% to $50,122/ton; LME lead futures were largely flat at $1,963.5/ton.
Precious Metals Gold and silver bounced back as bargain hunters entered the precious metals market following a sharp reversal from their earlier record-breaking rally.
Spot gold climbed as much as 7.1%, surpassing $4,990 per ounce. Silver advanced over 12%, breaking above $89 per ounce. A retreat in the US dollar and a return of risk appetite to the market supported the move.
Precious metal prices had pulled back from historic highs after market observers issued successive warnings that their gains, particularly for silver, had been too rapid and excessive. Prior to that, renewed concerns over geopolitical instability, currency debasement, and threats to the Federal Reserve's independence had underpinned the rally in precious metals.
Bank of America believes that the markets for both gold and silver will remain highly volatile following their sharp plunge from record highs.
As of 5:00 PM ET, spot gold was up 6.1% at $4,946.76 per ounce; Spot silver was up 7.4% at $85.1623 per ounce.
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