The global financial markets received a major development in the early hours of June 15. According to reports, the United States and Iran have reached a memorandum of understanding on a ceasefire. The market anticipates the Strait of Hormuz will reopen soon, leading to a sharp decline in international crude oil futures prices as trading for the new week commenced. Concurrently, international precious metals prices moved higher, with spot gold rising over 2.5% intraday to reclaim the $4,300 per ounce level.
The plunge in oil prices was directly triggered by a concentrated sell-off of the geopolitical risk premium that had accumulated earlier. As of 12:00 PM Beijing time, the price for the July delivery light sweet crude oil contract on the New York Mercantile Exchange fell to a low of $80 per barrel, a drop exceeding 5%. The price for the August delivery Brent crude oil contract on the London market fell to around $83.3 per barrel, a decline of over 4.5%.
A senior researcher at a futures firm noted that following military strikes by the US and Israel on Iran in late February, the effective obstruction of shipping through the Strait of Hormuz drove a significant rise in oil prices. The successive confirmations of a peace agreement by the US and Iran on June 14-15 became a turning point for the crude oil market. The geopolitical risk premium accumulated due to tensions in the Middle East was rapidly unwound as the market priced in the reopening of the Strait of Hormuz, leading to substantial declines in oil prices for two consecutive trading sessions.
Furthermore, as panic sentiment subsided, the market began to reassess fundamentals. On one hand, high oil prices and slowing global economic growth have created negative demand-side feedback. Simultaneously, sustained growth in US exports has resulted in an actual supply shortfall smaller than anticipated. On the other hand, with the resumption of navigation through the strait, Iran and other OPEC+ nations are beginning to restore production, revealing medium to long-term factors that could suppress prices.
Looking ahead, oil prices are likely to experience volatility at this stage, but the influence of geopolitical factors may gradually diminish. Meanwhile, other energy and chemical products could face downward pressure from the easing of the crude oil cost component.
However, the signing of an agreement does not equate to an immediate restoration of crude oil supply. The journey from resumed navigation to a full recovery of production capacity involves a lengthy physical transmission chain. Port facility maintenance, tanker scheduling reorganization, trade finance restoration, and insurance system rebuilding all require several months.
According to industry assessments, even after the Strait of Hormuz is declared open, it would take at least six months for Middle Eastern crude oil supply to return to pre-conflict levels. This suggests that while short-term market sentiment may have become overly pessimistic due to the peace agreement, the medium to long-term supply gap will not vanish overnight.
Additionally, as the agreement has not been formally signed, geopolitical uncertainty is not entirely eliminated. The market is highly focused on the implementation details of the deal and the pace of the strait's reopening, indicating that oil prices may still experience fluctuating volatility.
Precious Metals Surge: Reversal or Rebound?
Influenced by the news of the US-Iran agreement, the precious metals market saw a broad rally on June 15. Spot gold and silver prices surged, with gold prices gapping higher at the open and continuing to rise, as short-term bullish sentiment persisted. Furthermore, gold-related stocks in the A-share and Hong Kong markets experienced significant gains.
Gold stocks became the focal point of the precious metals market. In the A-share market, multiple gold-related stocks rose, highlighting strong sectoral momentum. The Hong Kong gold sector also strengthened.
Driven by the rise in international gold prices, domestic branded gold jewelry prices quickly followed suit. Currently, the price of most brands' pure gold jewelry has generally rebounded to around or above 1,300 yuan per gram, returning to recent highs.
Market observers pointed out that recently released US core CPI and PPI data for May were below market expectations, and the European Central Bank initiated an interest rate hike as anticipated. The macro headwinds that the market had worried about have materialized, and signs of easing geopolitical tensions have emerged. The combination of these factors has boosted the rebound in precious metals prices.
The expectation of geopolitical de-escalation is a core factor supporting the stabilization and rebound in gold prices. However, it remains to be seen whether the temporary positive impact from the easing situation can sustain a return to an upward trajectory for gold. This week, attention should focus on key events such as the initial interest rate decision statement from the Federal Reserve Chair and the execution details of the agreement.
A research head at a futures firm noted in a report that, from a medium-term perspective, precious metals market trading is concentrated on uncertainties surrounding the potential recurrence of the Middle East conflict, expectations for Federal Reserve monetary policy, economic stagflation, and financial market risks. Downside support comes from central bank gold purchasing demand. In a scenario where high oil prices persist, stagflation trading could become the next significant narrative driving precious metals higher.
Subsequent focus should be on the potential dampening effect of slowing economic growth on risk assets. If such signals receive further confirmation, they could provide support for a medium-term rise in gold prices, although short-term pressure may arise from renewed expectations of interest rate hikes. Conversely, if the Middle East geopolitical situation cools down and oil prices retreat, effectively easing inflationary pressures, the key environment for the Federal Reserve to potentially restart interest rate cuts would gradually form. This would also benefit a return of investment demand for gold, pushing prices higher.
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