The Commodities Feed: Oil Slides As Hopes Grow For A US And Iran Deal

Oil prices continue to sell off with recent developments pointing towards further de-escalation. However, for now, there is still no pickup in Persian Gulf oil flows

Energy – oil weakens as deal hopes grow

The oil market continues to sell off heavily, with the US and Iran continuing to hold off on further strikes, while President Trump said that talks are happening and that there is a “good chance” of a deal, although he warned that strikes would resume in the event a deal fails to materialise. Brent settled almost 9% lower yesterday, and this weakness has continued in early morning trading today.

However, we have been in this position multiple times before, and so the market may be getting a bit ahead of itself. At the end of the day, there has been no improvement in tanker flows through the Strait of Hormuz. If this move lower is to be sustained, we will need to see a recovery in flows through the strait. Furthermore, even in the event of a deal, one would expect that the market will need to continue to price in a large risk premium, given that recent events have demonstrated how quickly a deal can unravel.

In addition, there are still concerns over vessel movements through the Bab el-Mandeb Strait, putting Saudi oil exports from the Red Sea at risk. While tanker traffic through the Bab el-Mandeb Strait has slowed, given the risk of attack from the Houthis in Yemen, it has not ground to a halt. However, when it comes to the Houthis, the risk is not isolated to Saudi shipments, but also to Saudi oil infrastructure, which was targeted over the weekend. For now, it is still unclear what impact, if any, this may have on Saudi oil supply.

A resumption in oil flows from the Black Sea would also add some downward pressure on the market, with oil loadings at both the CPC terminal and the Sheskharis terminal in Russia resuming. The CPC terminal had been exporting roughly 1.7m b/d of Kazakh oil in recent months, while the Sheskharis terminal has seen Russian oil flows of around 650k b/d so far this year. Disruptions to oil loadings come amid ongoing Ukrainian drone attacks on Russian energy infrastructure, while bad weather in the Black Sea would have also played a role.

Metals – Gold gains as oil slump eases rate fears

Gold prices moved higher on Monday as a sharp decline in oil prices eased inflation concerns and the prospect of further monetary tightening. The move followed a pause in hostilities between the US and Iran.

Lower oil prices also weighed on the US dollar and Treasury yields, improving the outlook for non-yielding assets ahead of this week's Federal Reserve meeting. Markets are now looking to the Fed and upcoming US inflation data for further guidance on the interest-rate outlook.

Gold should remain supported near current levels if yields stay contained. However, any hawkish surprises from the Fed could limit further upside in the near term.

In base metals, copper also pushed higher, extending its strong July performance as easing Middle East tensions lifted broader market sentiment. The market continues to be supported by tight physical conditions, with inventories remaining low and Chinese demand for imported copper keeping premiums elevated. Ongoing uncertainty over potential US copper import tariffs is also providing additional support to the market.

We remain constructive on copper, with tight supply conditions and low inventories likely to keep prices well supported, particularly if demand in China continues to hold up.

Agriculture – Soybeans slide as US-Iran tensions ease

CBOT soybean prices fell more than 3% yesterday as easing US-Iran tensions triggered a sharp drop in crude oil prices. Weaker energy markets weighed on soybean oil, a key biofuel feedstock. Soybean and grain markets had rallied through much of July, supported by higher energy prices and concerns over crop supplies amid European heatwaves and escalating Russia-Ukraine tensions.

Meanwhile, favourable weather across West Africa is supporting cocoa crop development ahead of the main harvest, which usually starts between August and September. In the Ivory Coast, improving weather conditions have allowed farmers to restart plantation work and prepare for the next main crop. Similar weather conditions in Ghana are aiding harvest preparations. Cocoa prices have continued to trade in a fairly volatile manner, with front-month London futures falling almost 4.7% yesterday. However, prices are still almost 90% up from their February lows as the market increasingly focuses on the 2026/27 season, which appears to be tighter than initially expected.