Oil prices declined on Tuesday as shipping through the Strait of Hormuz rebounded amid hopes for a permanent peace deal between the U.S. and Iran, coupled with fresh warnings about near-term supply surpluses. Copper prices rose as traders awaited developments in the latest round of U.S.-Iran peace talks and further clues on the U.S. monetary policy outlook. Gold held above $4,000 per ounce as traders assessed the U.S. monetary policy path following the latest round of economic data.
Oil: Crude Prices Fall as Middle East Supply Return Heightens Glut Risks
Crude oil prices fell on Tuesday, pressured by the rebound in shipping through the Strait of Hormuz amid market hopes for a permanent U.S.-Iran peace accord, alongside new cautions about imminent supply excess.
WTI crude dropped 1.8%, settling around $70 per barrel. The more actively traded September Brent contract closed near $73 per barrel. Front-month futures have fallen nearly one-third in the second quarter, marking the largest decline since 2020, following a provisional U.S.-Iran agreement to reopen the Strait of Hormuz.
As more vessels can transit this critical energy chokepoint, the oil market is attempting to absorb the additional supply while major wartime alternative measures remain operational.
"The oil market continues to be pressured by expectations that fuel exports from the Middle East and Asia will increase global supply," said Dennis Kissler, head of energy trading at BOK Financial Securities Inc. "If you add that the U.S. driving season typically peaks in about two weeks, it's hard to find a reason to buy now."
Morgan Stanley lowered its oil price forecast for the second time in roughly two weeks, citing faster-than-anticipated restoration of oil shipments via the Strait of Hormuz. The bank also cut its price projection for a key physical benchmark next quarter by one-sixth, warning that flows through the strait need only recover to about 65% of pre-war levels to create a supply surplus. The bank's report stated, "With the focus shifting to 2027, the market has come full circle back to oversupply."
On the diplomatic front, Qatar stated that U.S. officials have arrived in Doha as part of ongoing U.S.-Iran peace negotiations, while the two nations work to de-escalate tensions around the Strait of Hormuz that intensified over the weekend.
Iran reiterated its determination to control maritime traffic through the Strait of Hormuz, but shipping showed signs of accelerating again following recent attacks in the waterway.
Iran has also received U.S. sanctions waivers to sell its oil, channeling more supply into the market.
Closing Prices
September Brent crude settled down 1.3% at $72.95 per barrel.
The less-traded August contract expired on Tuesday.
August WTI crude fell 1.8% to settle at $69.50 per barrel.
Base Metals: London Copper Rises
Copper prices advanced as traders awaited progress in the latest U.S.-Iran peace talks and more signals regarding the U.S. monetary policy outlook.
London copper closed up 0.7% at $13,375 per tonne, narrowing its monthly loss to 1.9%. Qatar indicated that Jared Kushner and Steve Witkoff have arrived in Doha as part of the ongoing peace talks between the U.S. and Iran, with both sides seeking to ease tensions surrounding the Strait of Hormuz.
Although oil prices fell on Tuesday, they remain a significant component of the inflation outlook. The latest U.S. economic data showed continued resilience, giving the Federal Reserve room to hold interest rates steady while continuing to monitor inflation pressures. A more hawkish policy stance typically supports the U.S. dollar, which acts as a headwind for dollar-denominated commodities.
Closing Prices for Base Metals
LME copper rose 0.7% to $13,375 per tonne.
LME aluminum edged down 0.1% to $3,085.5 per tonne.
LME nickel dipped 0.2% to $16,287 per tonne.
LME zinc gained 2.2% to $3,551.5 per tonne.
LME tin advanced 2.4% to $51,570 per tonne.
LME lead fell 1% to $1,875 per tonne.
Precious Metals: Gold Holds Above $4,000
Gold prices remained above $4,000 per ounce as traders evaluated the U.S. monetary policy trajectory following the release of the latest economic figures.
A series of data points underscored U.S. economic strength. U.S. May job openings indicated stable labor demand, consistent with the recent rebound in employment growth. June consumer confidence also saw a slight increase. This provides the Federal Reserve with leeway to maintain current interest rates while continuing to assess the inflation path. Traders are also closely monitoring developments in the U.S.-Iran peace negotiations.
"The market remains concerned that the Fed could maintain a hawkish stance despite the sharp drop in energy prices," said Ole Hansen, head of commodity strategy at Saxo Bank. He added that some traders might regain confidence from gold's rebound from last week's lows, but "gold needs to break above $4,100 to reasonably assume a short-term low is in place."
As of 4:25 p.m. New York time, spot gold was little changed at $4,013.75 per ounce.
Spot silver rose 1.2% to $58.98 per ounce.
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