LONDON – Oil and gold prices experienced a significant downturn on , as easing geopolitical tensions and a shift in expectations regarding US monetary policy prompted a sell-off in commodities markets. Stock markets, conversely, moved higher.
Both Brent crude and West Texas Intermediate (WTI) crude oil contracts shed approximately five percent of their value. Brent North Sea crude fell 4.9 percent to $65.51 per barrel, while WTI crude declined 5.2 percent to $61.81 per barrel. The decline followed comments from US President Donald Trump suggesting a potential easing of tensions with Iran, reducing fears of a disruption to oil supply. “The trigger for the sharp reversal were comments from President Trump suggesting an easing of tensions with Iran,” explained Trade Nation analyst David Morrison. “This reduced fears of an immediate supply shock,” he added.
The easing of tensions comes after weeks of heightened rhetoric from Washington regarding Iran’s response to anti-government protests, including threats of military action from President Trump. The administration has also been pursuing an agreement regarding Iran’s nuclear program.
Gold, which often benefits from its status as a safe-haven asset during times of geopolitical uncertainty, also saw a substantial decline. The price of gold fell 0.7 percent to $4,710 an ounce, a significant drop from the record highs above $5,500 reached the previous week. Silver experienced an even sharper fall, declining more than 7% after a 30% slump on Friday.
Analysts attribute the decline in gold prices to a combination of factors, including the reduced geopolitical risk and a shift in sentiment regarding US monetary policy. Russ Mould, investment director at AJ Bell, noted that “Many investors bought gold and silver as protection against the volatile geopolitical backdrop, yet they’ve learned the hard way these assets can also be volatile themselves.”
A key catalyst for the shift in market sentiment was President Trump’s announcement of his intention to nominate Kevin Warsh as the next chair of the US Federal Reserve. Warsh, a former Morgan Stanley investment banker and Fed governor, is widely regarded as a staunch inflation hawk. Traders anticipate that his monetary policy will likely support the value of the US dollar.
The nomination of Warsh also alleviated concerns about the independence of the Federal Reserve. Previously, President Trump had publicly criticized incumbent Jerome Powell for not cutting interest rates quickly enough, raising questions about potential political interference in monetary policy. The choice of Warsh, perceived as a more aligned candidate, eased those anxieties.
The commodities sell-off extended beyond oil and precious metals, encompassing industrial metals as well. This broader market weakness contributed to volatility across global markets. Asian stock markets were particularly affected, with Seoul plunging more than 5% and Tokyo and Taipei both shedding over 1%. Hong Kong, Shanghai, Sydney, Singapore, Wellington, Manila, and Bangkok also experienced declines.
While gold and silver prices initially recovered some ground following the initial sell-off, they remained significantly lower than their recent peaks. Gold settled at $4,700 an ounce in afternoon trading, down 3.5% from the start of the day. The FTSE 100 stock index, however, benefited from the easing of safe-haven demand, breaching the 10,300 mark for the first time and closing at 10,341 points.
The rapid shifts in commodity prices and market sentiment underscore the sensitivity of global markets to geopolitical developments and monetary policy expectations. The combination of easing tensions with Iran and the anticipated shift towards a more hawkish Federal Reserve chair has triggered a significant recalibration of risk appetite among investors.
