Oil prices came under heavy selling pressure during the Asian session on Monday after market expectations shifted rapidly following US President Donald Trump’s announcement that he had canceled a planned military strike against Iran and opened the door to a new round of negotiations.
Brent crude futures for October delivery fell 4.8% to $83.68 per barrel, while West Texas Intermediate crude dropped 4.9% to $80.50, pushing both contracts to their lowest levels in three weeks.
The decline was not driven by a sudden change in global demand. Instead, it reflected the removal of a large portion of the geopolitical risk premium that had accumulated in prices over recent weeks. Markets had been pricing in the possibility of a broader conflict and disruptions to shipping through the Strait of Hormuz and the Red Sea before Trump’s comments brought the prospect of a diplomatic solution back into focus.
The decision to cancel the strike followed requests from Iran and several regional countries for more time to pursue negotiations. The talks are expected to focus on reopening the Strait of Hormuz and reaching an understanding regarding Iran’s nuclear program.
Attacks on Saudi oil facilities, gas vessels at Egypt’s Damietta port, and shipping routes in the Red Sea and the Strait of Hormuz had briefly pushed Brent crude above $90 per barrel as concerns grew over the security of several major energy transit routes.
The return of diplomatic discussions prompted traders to close long positions that had been built in anticipation of a wider conflict. This explains the speed and scale of the decline at the beginning of the week.
Selling pressure increased after OPEC Plus announced that it would raise production quotas by around 188,000 barrels per day starting in September. The decision indicates that the group remains committed to gradually restoring supply to the market as some of the risks threatening production and transportation begin to ease.
Despite losing more than 5% during the previous week, both crude benchmarks still recorded monthly gains of more than 20% in July, reflecting the wide price swings caused by military and political developments.
In the metals market, gold continued to rise as a weaker dollar and falling oil prices supported demand. Spot gold gained 0.5% to $4,062.41 per ounce, while gold futures rose 0.3% to $4,117.35.
Silver also advanced to $57.98 per ounce, while platinum climbed to $1,650.18.
The decline in oil prices by more than $5 per barrel reduced concerns that energy supply disruptions could keep inflation elevated. This development lowered expectations for more aggressive monetary tightening and allowed gold to regain part of its upward momentum.
The weaker dollar also provided additional support after the US Dollar Index fell to around 99.7. A lower dollar makes gold less expensive for investors using other currencies, which can strengthen international demand for the metal.
Despite these supportive factors, the latest advance has not yet developed into a confirmed upward trend. Comments from three Federal Reserve officials calling for an immediate interest rate increase because of persistent inflation kept investors cautious.
Higher interest rates usually weigh on gold because the metal does not provide regular income, while bonds and other fixed income assets become more attractive as yields rise.
From a price action perspective, gold faces an important resistance zone between $4,110 and $4,120. A sustained move above this area could give buyers an opportunity to target the early July high of $4,202.
Continued failure to break through resistance could push prices back toward $3,942, which represents the late June low and one of the most important support levels currently being watched.
Investors are now preparing for a busy week of US labor market data, including the JOLTS job openings report, the ADP private payrolls report, weekly jobless claims, and Friday’s nonfarm payrolls report.
The results will shape interest rate expectations for the coming period. Strong figures could support the dollar and bond yields while placing pressure on gold. Weaker data could give the metal an opportunity to break above resistance and begin a broader upward move.
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