Oil prices have recorded their longest losing streak of the year as expectations for supply recovery grew following a US-Iran deal to reopen the Strait of Hormuz, prompting several major Wall Street banks to lower their price forecasts. Aluminum prices saw a modest increase, while gold prices advanced.
Crude Oil: Oil Prices Extend Losses on Supply Hopes from US-Iran Deal
Oil prices extended their decline, marking the longest losing streak this year. Market expectations for a restoration of supply increased after the United States and Iran reached an agreement to reopen the Strait of Hormuz, leading multiple Wall Street institutions to revise their oil price predictions downward.
The global benchmark Brent crude fell for a fourth consecutive session, closing below $79 per barrel to reach its lowest level since early March.
The United States and Iran are preparing to formally sign an interim peace agreement on Friday, which would allow oil tankers stranded since the conflict began to move through this critical waterway.
Oil losses deepened following reports that the agreement would permit Iran to immediately resume oil sales.
According to a draft of the agreement close to its final form, the United States is also set to provide Iran with other economic benefits. These include access to a $300 billion development fund and exemptions for exports of Iranian crude oil, petrochemicals, and their derivatives.
Both Morgan Stanley and Goldman Sachs lowered their oil price forecasts for the coming quarters. Goldman Sachs now anticipates that Persian Gulf exports will return to pre-war levels by the end of July, a month earlier than previously projected.
Oil prices have largely erased most of the gains made during the conflict. This could help alleviate inflationary pressures as Federal Reserve policymakers assess the interest rate outlook this week.
Nevertheless, significant questions remain regarding the implementation of the interim agreement. These include shipping safety, operational rules, and whether transit fees will be imposed.
Analysts including Martijn Rats at Morgan Stanley wrote in a report, "There is still much to negotiate, and key risks remain, but for now, this is a significant step towards de-escalation and increasing crude oil exports through the Strait of Hormuz."
WTI crude for July delivery fell 5.8%, settling at $76.05 per barrel.
Brent crude for August delivery declined 5.1%, settling at $78.96 per barrel.
Base Metals: Aluminum Prices Edge Higher
Aluminum prices posted a slight gain.
London Metal Exchange (LME) aluminum settled 0.3% higher at $3,388.50 per ton. However, the metal still recorded a loss for the period following the announcement of the US-Iran deal over the weekend.
At the close, LME copper was up 0.2% at $13,774 per ton.
LME aluminum was up 0.3% at $3,388.5 per ton.
LME nickel gained 0.5% to $17,996 per ton.
LME zinc fell 0.6% to $3,569 per ton.
LME tin declined 0.3% to $55,126 per ton.
LME lead advanced 0.6% to $1,982 per ton.
Precious Metals: Gold Prices Rise
Gold prices moved higher following indications from former US President Trump that the Strait of Hormuz could reopen on Friday. This development holds the potential to ease the energy and inflation shocks that have previously disrupted global markets.
Gold continued to climb on Tuesday, building on a 2.2% gain from the previous session. The United States and Iran announced an interim deal aimed at ending the war and lifting the maritime blockade in the region. However, a note of caution was sounded as US allies were less optimistic about a rapid restoration of energy and other commodity flows through this strategic waterway. Crude oil prices extended their decline, pulling bond yields lower.
Alex Wolf, Global Head of Macro and Fixed Income Strategy at J.P. Morgan Private Bank, stated in an interview, "I view the US-Iran deal as a positive catalyst for gold because many of the headwinds from the conflict are starting to fade." He pointed out that these headwinds included rising energy prices, higher bond yields, a stronger US dollar, and reduced buying demand from Middle Eastern investors and central banks.
Wolf noted that as these challenges subside, gold's structural drivers would reassert themselves. These include central bank purchases, diversification away from the US dollar, and sustained demand from Asia and the Middle East.
Spot gold was up 0.5% at $4,331.21 per ounce as of 6 p.m. New York time.
Spot silver was largely unchanged at $70.0248 per ounce.
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