Oil And Gold Prices: Will US-Iran Peace Deal Reshape Markets Next Week?

Oil prices are expected to fall, while gold prices could see an upward trend next week, as the US and Iran move closer to a deal.

The US and Iran were reportedly close to reaching an agreement to formally end the Middle East war after President Donald Trump said a proposal that included opening the blockaded Strait of Hormuz was“largely negotiated.”

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Global markets are closely monitoring US–Iran developments, as this issue remains one of the most influential factors affecting energy and precious metals markets at the current stage.

“Any political agreement or economic understanding between the two sides would have a direct impact on oil, gold, and silver prices – not only from a supply-and-demand standpoint, but also through changes in global risk appetite and the decline of geopolitical risk premiums. Markets may begin Monday's trading session with noticeable price gaps driven by rapid investor reactions, before prices gradually return to more balanced levels as markets absorb the actual details of the agreement and assess its real impact on global financial markets,” said Rania Gule, senior market analyst for MENA at x.com.

Brent and WTI closed the week at $103.5 and $96.6 per barrel, respectively.

Gold ended at $4,509.64 per ounce over the weekend. In the UAE, 24K and 22K gold prices were trading at Dh543.25 and Dh503.25 per gram, respectively. Silver was trading at $75.51 (Dh277.37) per ounce over the weekend.

Gule anticipated that an agreement between the two warring parties would exert direct downward pressure on oil prices, due to expectations that part of the Iranian oil supply will return to global markets.

“I expect oil to initially move in a downward trajectory, potentially ranging between four and eight per cent during the first phase following an official announcement, if it occurs today as reported yesterday – especially if the agreement includes a meaningful easing of oil sanctions and an unconditional opening of the Strait of Hormuz.”

Norbert Rücker, head of economics and next generation research at Julius Baer, said observing the oil market feels like watching a tug-of-war tournament.“Escalation concerns have dissipated again, and trade through Hormuz shows some signs of life. While the dealmaking aspirations of the US and Iran remain fogged, bilateral agreements between oil sellers, oil buyers, and Iran might explain the Hormuz traffic pickup. Politics aside, the oil market has moved past the initial shock reaction and has settled in a regime of deficit absorption by inventory draws. There is breathing room to deal with the supply shock beyond the summer,” he said.

For gold, Rania Gule believes that prices may experience profit-taking and a relative decline due to reduced demand for safe-haven assets amid easing political tensions in the region.

“However, I see this decline as relatively limited, as gold remains supported by important structural factors such as expectations of US interest rate cuts, continued central bank purchases, and concerns related to global debt levels. Accordingly, I see gold moving within a short-term and very short-term decline of around two to five per cent,” she added.

Regarding silver, it is likely to follow gold's direction but with higher volatility, given its dual nature as both an investment safe-haven and an industrial metal.

“Silver is likely to decline by approximately three to seven per cent in the initial reaction to any potential agreement, before resuming movement in line with broader global economic conditions and industrial demand,” added Gule.

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