Oil prices fell as signs emerged that the US and Iran are nearing a provisional peace agreement, raising hopes for the reopening of the Strait of Hormuz. Copper prices rose on expectations that a potential end to the war could improve the outlook for global economic growth, which would benefit the metals market. Gold prices saw a modest increase.
Crude Oil: Brent Hits Lowest Since Early March on Potential Strait Reopening
Oil prices dropped to their lowest levels since the early days of the Iran war, driven by indications of a recovery in traffic through the Strait of Hormuz and apparent progress towards a temporary peace accord between the US and Iran.
Brent crude futures declined by 3.4%, settling at $87.33 per barrel, marking the lowest close since March 5 and a weekly drop of 6.2%.
WTI fell 3.2% on Friday, while European natural gas prices plunged as much as 8.4% at one point.
Senior officials indicated that the US and Iran are close to a deal to reopen the Strait of Hormuz, potentially to be signed during next week's G7 leaders' summit.
However, conflicting signals from Washington and Tehran have cast doubt on this timeline.
Beyond the expectations for a peace deal, the market's gradual adaptation to the Strait's closure has also accelerated the oil price decline.
In recent weeks, a growing number of vessels have transited the Strait of Hormuz with their satellite signals turned off. Concurrently, a sharp drop in crude imports and a surge in US crude exports have helped rebalance the market's supply and demand.
Rob Haworth, a senior investment strategist at US Bank, noted that even if a provisional peace deal is finalized and the Strait reopens, "our supplies will still be constrained."
Scott Shelton, an energy specialist at ICAP, suggested that many nations might still prioritize purchasing US crude over Persian Gulf crude even after the Strait's reopening.
WTI for July delivery fell 3.2% to settle at $84.88 per barrel.
Brent for August delivery fell 3.4% to settle at $87.33 per barrel.
European natural gas futures declined 5.87% to 46.77 euros per megawatt-hour.
Industrial Metals
Copper prices advanced as traders assessed the prospect of a potential end to the Iran war.
Should the more than three-month-long conflict conclude via an agreement, it would help improve the global economic growth outlook, which is positive for metals markets.
Copper demand has remained relatively robust, and the prospect of potential US tariffs on copper also presents an upside risk to the price.
At the close, LME copper rose 1.6% to $13,698 per metric ton.
LME aluminum increased 0.9% to $3,535 per ton.
LME nickel gained 0.8% to $17,830 per ton.
LME zinc climbed 2.5% to $3,584 per ton.
LME tin advanced 1.7% to $53,752 per ton.
LME lead rose 1.1% to $1,966 per ton.
Precious Metals
Gold prices moved slightly higher as the market evaluated the prospects for a provisional US-Iran peace agreement.
Optimism surrounding a potential deal has weighed on oil prices, which could ease inflationary pressures that were elevated by the war. Rising interest rates are typically negative for non-yielding gold.
Preliminary survey data from the University of Michigan showed that US consumers' expectations for annual inflation over the next 5 to 10 years eased in June, which also helps reduce pressure on the Federal Reserve to raise interest rates.
As of 4:59 PM Eastern Time, spot gold was up 0.2% at $4,219.33 per ounce.
Spot silver increased 1.1% to $68.0213 per ounce.
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