Oil prices fell sharply after former President Trump stated the U.S. has entered the "final stage" in dealing with Iran. This remark reignited market hopes for a near-term resumption of energy shipping activities through the Strait of Hormuz. Gold prices rose as optimism about an end to Middle East conflict weakened bets on interest rates staying higher for longer. Base metals advanced broadly.
Crude Oil: Oil Prices Drop on Trump's "Final Stage" Comment on Iran Oil prices fell sharply after former President Trump said the U.S. has entered the "final stage" in handling Iran. His comments revived market hopes that energy shipping via the Strait of Hormuz could resume soon.
WTI crude fell 5.7%, settling around $98 per barrel. Trump's remarks to the White House press corps on Wednesday fueled hopes for a potential agreement between Washington and Tehran.
"One has to take such news with a grain of salt," said Fawad Razaqzada, a global macro market analyst at StoneX. "Trump has made similar comments multiple times during this conflict, and the outcome has often been the opposite. Let's see if this time is different."
The conflict, now in its twelfth week, has disrupted shipping through the Strait of Hormuz, contributing to elevated global energy prices and inflation. Nonetheless, traders have been anticipating the possibility of a sudden de-escalation, hoping for a deal that would prompt Iran to reopen this critical waterway and release millions of barrels of oil trapped in the Persian Gulf.
Some initial signs of increased shipping activity through the strait are gradually eroding the risk premium embedded in crude prices. In recent hours, three supertankers appeared to be attempting to traverse the Strait of Hormuz, marking a slight uptick in activity following relative quiet in recent days.
Trump stated on Wednesday that handling the Iran issue has reached a "final stage," suggesting either a deal is reached or "we will take some less friendly measures, but hopefully that won't happen."
On Tuesday, a massive bearish options trade in Brent crude, equivalent to 134 million barrels, unsettled a market already on high alert for unusual flows. The trade could yield a profit of up to $129 million if July futures fall about 15% from current levels within a week.
July WTI crude fell 5.7% to settle at $98.26 per barrel. July Brent crude fell 5.6% to settle at $105.02 per barrel.
Precious Metals: Gold Prices Move Higher Gold prices rose as optimism about a resolution to the Middle East conflict weakened expectations that interest rates would remain elevated for an extended period.
Gold climbed as much as 1.6% after Trump's comment that the U.S. is in the "final stage" with Iran. A retreat in the U.S. dollar and Treasury yields boosted the dollar-denominated, non-yielding metal. Further declines in oil prices and gains in U.S. stocks also contributed.
"The current environment highlights the increasingly important distinction between the trader's short-term focus and the investor's long-term focus," said Ole Hansen, head of commodity strategy at Saxo Bank, in a note.
As of 5:13 p.m. New York time, spot gold was up 1.4% at $4,544.19 per ounce. Spot silver was up 2.9% at $75.898 per ounce.
Base Metals: Broad-Based Gains Base metals rose broadly as the U.S. dollar weakened and oil prices declined.
At the close, LME copper was up 1.8% at $13,655.5 per tonne. LME aluminum was up 0.6% at $3,622.5 per tonne. LME zinc was up 1.2% at $3,555.5 per tonne. LME nickel was up 0.7% at $18,929 per tonne. LME tin was up 4.7% at $54,034 per tonne. LME lead was up 0.8% at $1,979.5 per tonne.
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