Gold prices surged sharply in early Asian trade on Monday as developments over the weekend spurred more hopes for a U.S.-Iran peace deal. Spot gold jumped 1.5% to $4,577.12 an ounce by 19:49 ET (23:49 GMT), while gold futures rose 1.2% to $4,612.24/oz. Other precious metals also rallied significantly, with spot silver jumping 3.8% to $78.3865/oz and spot platinum jumping 2% to $1,965.45/oz. The sharp rise in gold prices was driven by a sharp drop in the dollar and Treasury yields, which benefited bullion prices as investors sought safe-haven assets amid the geopolitical developments.
The U.S. dollar declined at the start of Asian trading on Monday as hopes of a deal to reopen the Strait of Hormuz pushed oil prices below $100 per barrel. According to reports from Reuters, the dollar was down 0.2% against the yen at 158.87 yen, while the euro rose 0.3% to $1.1642 and the British pound gained 0.4% to $1.3485. The Australian dollar advanced 0.4% to $0.7160, and its kiwi counterpart tacked on 0.5% to $0.5877. Latest data from Devdiscourse shows the Japanese yen firmed to 158.85 per U.S. dollar in early trading as the safe haven dollar gave up some of its recent gains.
Oil markets tumbled significantly as Brent crude prices fell 5.1% to $98.29 a barrel, while U.S. West Texas Intermediate was at $91.76 a barrel, off 5%. As reported by Reuters, the decline came despite the Trump administration playing down the chances of reaching an agreement with Iran soon. However, latest data from Devdiscourse shows oil prices hit two-week lows to kickstart the week, with Brent crude futures down over 4% to $98.83 a barrel and U.S. West Texas Intermediate at $92.03 a barrel, both down over 4%. The nearly three-month war in the Middle East has sent energy prices soaring and rewired global rates outlook due to worries over inflation as Tehran effectively shut down the strait through which much of the world's energy supply passes. Media reports showed the potential agreement will extend the current U.S.-Iran ceasefire and reopen shipping through the Strait of Hormuz, helping resupply global oil markets.
Over the weekend, hopes for a lasting peace deal appeared fragile as U.S. President Donald Trump wrote on Saturday that a memorandum of understanding on a peace deal with Iran had been 'largely negotiated,' with both countries and mediators in Pakistan reporting progress. However, according to Reuters, Trump wrote on Truth Social on Sunday that the U.S. blockade on Iranian ships in the Strait of Hormuz would 'remain in full force and effect until an agreement is reached, certified, and signed.' Just a day earlier, Trump had said that Washington and Iran had 'largely negotiated' a memorandum of understanding on a peace deal that would reopen the waterway, which before the conflict carried one-fifth of global oil and liquefied natural gas shipments. Other reports showed the U.S. and Iran remaining at odds over key issues, especially Tehran's nuclear activities, with Iranian officials largely rejecting U.S. demands to hand over their holdings of enriched uranium.
Analysts from Westpac noted that there are early signs that risk sentiment remains supported, with early Sydney trade revealing a broad-based selloff in the USD. As reported by Reuters, Chris Weston, head of research at Pepperstone Group Ltd in Melbourne, said markets have become conditioned to be incredibly patient on a tangible breakthrough, but the base case of a deal remains firm, with the weekend news providing further conviction, even if the timing remains unclear. According to Devdiscourse, Nick Twidale, chief market analyst at ATFX Global, expects the market to embrace more risk on Monday but not to surge higher until there is confirmation that the Strait of Hormuz will reopen. Commonwealth Bank of Australia strategists identified the most important issues as when the Strait of Hormuz will re-open, under what conditions it will reopen, and how long it will take to repair production facilities and infrastructure to ramp up production of energy and other goods to pre-war levels. The hopes that a peace deal was close helped soothe some market concerns over energy-driven inflation stemming from the Iran war, which had been a major point of pressure on gold in recent months as markets feared higher inflation could invite more interest rate hikes from the Federal Reserve.
U.S. stock futures rose on Monday as the prospect of a deal to end the Iran war buoyed risk appetite, with Nasdaq futures up 0.89% and S&P futures up 0.6% according to Devdiscourse. Japan's Nikkei was poised for a strong start to Monday's session. The positive equity sentiment reflects investor optimism about potential resolution to the Middle East conflict, though enthusiasm remains tempered by the lack of clarity over when the Strait of Hormuz would reopen. The rally in precious metals also reflects broader market confidence that a peace deal could help ease inflationary pressures that had been weighing on commodity markets.
