Trump's Optimistic Outlook on Iran Deal
Donald Trump has once again expressed confidence that a deal to end the conflict he and Israel initiated with Iran could be reached within "two or three days." This statement comes as the Middle East ceasefire faces challenges, prompting traders to retreat from oil and gold markets. Trump emphasized that the Strait of Hormuz would reopen "immediately" following an agreement, highlighting its significance as a critical point in global energy trade.
The former president claimed that both sides are nearing the conclusion of discussions on a "very, very good deal" that would prevent the development of nuclear weapons. Sky News Arabia reported on Monday that a draft agreement had been sent to Washington for review and was "preliminarily acceptable" to the White House.
Escalation of Tensions Between Iran and Israel
Just before making these remarks, Iran and Israel exchanged strikes over the weekend, marking the first such incident since the truce began in mid-April. Iran launched missiles toward northern Israel after accusing Jerusalem of violating the truce through attacks in Lebanon. These Israeli strikes included an attack on Beirut’s southern suburbs on Sunday. In response, Israel announced a "large-scale strike on strategic defense systems."
Trump, known for his bold statements regarding the war, previously predicted the fighting would last four to six weeks. However, the conflict surpassed the 100-day mark on Sunday. Additionally, Trump addressed a separate U.S. military incident near the Strait of Hormuz. He confirmed that the pilots of a U.S. military Apache helicopter that crashed on Monday were unharmed and stated that the administration would release a report on Tuesday. The cause of the crash remains under investigation.
Impact on Oil and Gold Markets
Oil prices fell on Tuesday morning following the ceasefire comments. Brent crude dropped 1.3% to $93.02 a barrel, while U.S. West Texas Intermediate fell 1.8% to $89.67 a barrel. Brent was also trading near $94 during Tuesday’s session.
Energy and gold analysts have provided insights into the potential future of these markets. Claudio Galimberti, chief economist at Rystad Energy, warned that oil could reach $150 per barrel within the next couple of months if the fighting continues and inventories keep declining. He noted that without a resolution to the Middle East conflict, inventories would continue to fall, leading to higher prices. Galimberti also highlighted a long-term concern: even if the current oil squeeze is resolved, the market might face a significant supply glut due to OPEC's actions and the UAE's withdrawal from the cartel. He suggested that 2027 could see a "humongous surplus."
Gold prices have experienced a sharp decline since reaching an all-time high of $5,594.82 an ounce on January 29. Analysts at Citi, owned by Citigroup Inc., predict that gold could fall to $3,500 an ounce if the Strait of Hormuz remains closed until the end of summer. This would represent a 19.7% drop from the $4,357.90 price seen at 7 a.m. ET on Tuesday. Citi described gold as "incredibly high risk" in the short term, noting that a prolonged closure of the Strait of Hormuz could slow global gold buying and bring prices back to levels seen about nine months ago.
Factors Affecting Gold Prices
The recent U.S.-Iran conflict has impacted gold's safe-haven status, as traders question the reasons behind its significant increase. A stronger-than-expected U.S. jobs report last week added pressure, raising expectations for a year-end interest rate hike. Higher rates typically hurt gold because the metal does not yield any return. Citi has lowered its three-month gold target to $4,000 an ounce from $4,300, while U.S. gold futures for August delivery traded at $4,352.90 on Tuesday morning.
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