Gold futures climbed above $4,550 an ounce on Sunday, driven by market speculation about a potential peace deal between the United States and Iran that could ease months of military tension.
The potential agreement, announced by former President Trump, includes a commitment from Tehran to give up its stockpile of highly enriched uranium, according to two U.S. officials cited by The New York Times.
The geopolitical turmoil has had a significant impact on oil prices, which have hovered near $100 a barrel since Iran's closure of the Strait of Hormuz. The International Energy Agency has warned that global oil inventories are being depleted at a record rate, which could push Brent crude prices to $130-$140 a barrel if the strait remains closed.
A confirmed deal could lead to a significant reduction in geopolitical risk, potentially reopening the Strait of Hormuz and easing pressure on global oil supplies. However, the unusual positive reaction in gold, a traditional safe-haven asset, suggests the market may be pricing in the inflationary consequences of the deal or other non-obvious details.
The prospect of a resolution to the conflict has brought the precarious state of global energy markets into sharp focus. Since Iran closed the Strait of Hormuz in response to the US and Israeli military campaign, the cost of a barrel of crude on the spot market has jumped, approaching $100. While this is below historic highs, the International Energy Agency (IEA) has warned that oil stocks are being depleted at a record rate.
Analysts have cautioned that a "non-linear adjustment" could be imminent. Hamad Hussain at Capital Economics warned that if the strait remains closed, "oil stocks could reach critically low levels by the end of June," potentially pushing Brent crude to between $130 and $140 a barrel. This could trigger "demand destruction" as high prices force consumers and industries to cut back. JP Morgan's Natasha Kaneva echoed these concerns, stating that OECD country stocks could reach "operational stress levels" by early June.
The impact of the oil shock is already being felt by consumers. Research by Professor Jeff Colgan at Brown University suggests that American consumers have paid an additional $40 billion, or $300 per household, in gasoline costs since the war began. The Institute for International Finance (IIF) noted that the disruption is spreading beyond oil to liquefied natural gas (LNG), fertilizers, and shipping, threatening the reliability of the global production system itself.
It remains unclear if a potential deal would lead to a full reopening of the Strait of Hormuz. Even if it does, the IIF predicts only a "partial normalization," with the energy system remaining "tighter and more fragile than before the shock."
This article is for informational purposes only and does not constitute investment advice.
