Oil prices have advanced for a third consecutive day as renewed conflict between the US and Iran casts doubt over the prospects for a peace agreement, while gold and copper prices have moved lower.
Crude Oil: Fresh US-Iran Clashes Cloud Peace Prospects, Extending Oil's Rally
Crude oil prices rose for a third straight session on Wednesday, with fresh tit-for-tat attacks between the United States and Iran fueling skepticism about the potential for a deal to reopen the Strait of Hormuz.
WTI crude gained 2.4%, settling near $96 a barrel, bringing its weekly advance to approximately 9.6%. The moves followed reports that US forces were targeted by missile and drone attacks shortly after striking an empty oil tanker bound for Iran. Iran also launched attacks on the main US naval base in Bahrain and another air base in Kuwait.
Earlier in the week, conflicting statements from Iran and the US regarding the peace talks had already increased price volatility. Israel's military actions in Lebanon added another layer of complexity to the negotiations.
With talks between the US and Iran stalling, global supply buffers are depleting rapidly. US government data shows petroleum inventories have fallen for eight consecutive weeks, the longest streak since early 2022. Crude stocks at Cushing, Oklahoma, the delivery point for the US benchmark, declined for a sixth week, nearing the so-called minimum operating level.
As Wednesday's trading wound down, a report from Iran's semi-official Tasnim news agency stated that communication with the US continues but talks have yet to yield progress.
"Uncertainty is the theme for now, but the likelihood of a credible peace deal remains low as long as there is no agreement on Iran's highly enriched uranium, the Strait of Hormuz, and Lebanon," said Florence Schmit, an energy strategist at Rabobank.
At the close, July WTI crude futures were up 2.4% at $96.02 a barrel, while August Brent crude gained 1.9% to $97.81 a barrel.
Precious Metals: Gold Prices Decline
Gold prices fell on Wednesday as renewed conflict in the Middle East dimmed hopes for a US-Iran peace deal, keeping energy prices elevated and inflation concerns high.
Gold dropped as much as 1.4% to below $4,430 an ounce, hitting its lowest intraday level in nearly a week.
The decline followed overnight clashes between the US and Iran, involving Kuwait and Bahrain, marking one of the most significant escalations since a ceasefire took effect in early April, after several days of rising tensions.
Oil's third straight day of gains and elevated levels, coupled with signs of resilience in the US jobs market, reinforced concerns about the Federal Reserve's interest rate path.
"The Middle East remains a key source of uncertainty, with the constant flow of news continuing to impact short-term market sentiment," said Ahmad Assiri, a market strategist at Pepperstone Group Ltd. "The repeated escalations and de-escalations create a challenging environment for investors trying to assess the true level of risk facing gold."
Since the outbreak of the Iran war in late February, gold has largely moved inversely to oil. Gold fell sharply early in the conflict and remains about 16% below its pre-war level, though it has traded in a narrow range in recent weeks.
Assiri noted that the gold price "maintained a pattern of lower highs, suggesting underlying sentiment remains fragile."
As of 2:14 p.m. New York time, spot gold was down 1.2% at $4,436.82 an ounce. Silver fell 2.5% to $73.24 an ounce. Platinum and palladium also declined. The Bloomberg Dollar Spot Index rose 0.3%.
Base Metals: Copper Prices Retreat
Copper prices retreated from a three-week high as investors grew wary over the Middle East situation.
At the London market close, LME copper fell 1.5% to $13,825 a metric ton. LME aluminum dropped 1.3% to $3,703.5 a ton. LME zinc declined 0.8% to $3,610.5 a ton. LME nickel was down 2% at $18,871 a ton. LME tin fell 0.9% to $57,408 a ton. LME lead decreased 1% to $2,023.5 a ton.
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