Crude oil prices rose on Thursday amid fresh signs of escalating tensions in the Middle East, diminishing hopes for a swift reopening of the Strait of Hormuz, while copper prices fell in response. Sustained gains in oil prices heightened investor concerns about inflation, leading to a decline in gold prices.
Oil: Escalating Iran Situation Drives Price Increase Crude oil prices advanced on Thursday as new indications of an escalation in the conflict involving Iran further clouded the prospects for a near-term restoration of navigation through the Strait of Hormuz.
WTI crude futures in New York climbed 3.1%, settling near $96 per barrel, after rising as much as 5.8% during the session. Brent crude futures closed above $105 per barrel.
Oil prices were volatile for much of the day but surged significantly in late trading. A stalemate in peace talks, intensified rhetoric from both sides, and heightened military threats injected a higher geopolitical risk premium into the market.
Reports from Iranian media indicated that air defense systems had been activated in parts of Tehran to counter "hostile targets," though specifics were not provided. Investors have grown increasingly uneasy about the potential for renewed attacks on energy infrastructure in the region, particularly after Israel stated on Thursday its readiness to resume strikes against Iran.
As both the United States and Iran maintain a blockade of the Strait of Hormuz, shipowners are seeing growing evidence that transit through this critical waterway is unsafe.
Earlier on Thursday, former U.S. President Donald Trump posted on social media that he had directed the U.S. Navy to "shoot" any vessels laying mines in the Strait of Hormuz, a statement which contributed to the rise in oil prices.
Mona Yacoubian, Director of the Middle East Program at the Center for Strategic and International Studies, commented, "The ceasefire may be unraveling. We are seeing vessels being boarded, Iran openly defying the U.S., and the U.S. expanding its operational reach well beyond Middle Eastern waters. The escalation in maritime activity is real."
For those considering transit through the Strait of Hormuz, the extent of mine-laying operations and the time required to clear potential naval mines remain unresolved questions.
Giovanni Staunovo, an analyst at UBS Group AG in Zurich, stated, "As long as transit through the Strait of Hormuz remains restricted, the market will continue to tighten, oil inventories will keep falling, and oil prices will remain supported."
At market close: June WTI crude settled up 3.1%, at $95.85 per barrel. June Brent crude settled up 3.1%, at $105.07 per barrel.
Base Metals: Middle East Tensions Weigh on Copper Prices Copper declined on Thursday alongside most other base metals as investors closely monitored the next major developments in the Middle East situation following a stall in peace talks.
Rising tensions between the U.S. and Iran over the Strait of Hormuz, with both sides maintaining a blockade of the crucial passage, created an uneasy standoff, and prospects for new negotiations remained distant.
Copper on the London Metal Exchange fell 0.6% to $13,355.50 per metric ton, after having gained 1.5% on Wednesday to reach its highest closing level since early February.
At the close of London trading: LME copper fell 0.6% to $13,355.50 per ton. LME aluminum rose 0.2% to $3,620 per ton. LME nickel increased 1.5% to $18,737 per ton. LME zinc declined 0.5% to $3,453 per ton. LME tin dropped 0.4% to $50,215 per ton. LME lead decreased 0.5% to $1,954.50 per ton.
Precious Metals: Gold Prices Retreat Gold declined as escalating tensions surrounding the Strait of Hormuz pushed oil prices higher, reigniting concerns about persistent inflation.
The price of gold fell as much as 1.2% before paring some losses. Brent crude extended its gains, marking a fourth consecutive session of increases, amid heightened tensions between the U.S. and Iran over the strategic waterway. U.S. Treasury yields and the U.S. dollar also moved higher.
Since the outbreak of conflict in late February, rising energy prices have amplified market worries about inflation, potentially prompting the Federal Reserve and other central banks to maintain higher interest rates for a longer period, or even implement further rate hikes—conditions that are typically unfavorable for gold.
Rhona O'Connell, Head of Market Analysis for EMEA and Asia at StoneX Group Inc., noted in a report that the precious metals market "will continue to exhibit caution and volatility." She added, "Given the highly tense geopolitical situation, professional trading firms are reluctant to establish large positions."
As of 3:35 PM ET: Spot gold fell 1.0% to $4,692.21 per ounce. Spot silver declined 2.8% to $75.5386 per ounce.
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