Oil prices experienced a sharp decline on Tuesday, dropping more than 4% to reach a fresh three-month low, driven by growing expectations that the United States and Iran are nearing an agreement to end their conflict. West Texas Intermediate crude fell to $76.59 per barrel, while Brent crude dipped to $79.51, marking its lowest close since early March.
The sell-off accelerated after reports emerged of an interim peace deal between the US and Iran, which would extend a fragile ceasefire by 60 days and reopen the Strait of Hormuz. Before the conflict erupted in late February, both benchmarks had been trading in the $65–$70 range. The strait, which handles roughly 20% of global oil supplies, had been effectively blocked by Iran since the fighting began.
Bank Forecasts Slashed
In response to the deal, major investment banks including Goldman Sachs, Morgan Stanley, and Citi have lowered their oil price forecasts. Analysts caution that shipping traffic and energy exports may take weeks to fully recover, as key details of the agreement remain undisclosed.
Additional bearish pressures include concerns over China's economy, with crude throughput falling 9.1% year-on-year in May to its lowest level in nearly four years. US calls for peace between Russia and Ukraine also weighed on prices, as a settlement could lead to sanctions relief and allow Moscow to boost exports.
Gold Rises on Rate Outlook
Gold prices climbed more than 1% on Tuesday, buoyed by expectations that the Federal Reserve will hold interest rates steady for the remainder of 2026. The CME FedWatch tool now shows a 60% probability of no rate hike in December, down from around 70% last week.
At the time of writing, gold was trading at $4,366.51 per ounce, up 0.3%. Silver also gained, rising to $70.365 per ounce. The precious metals benefited from the drop in oil prices, which reduced inflation concerns and lessened the urgency for rate hikes.
“As a non-interest-bearing asset, gold is benefiting from this revised assessment, after having previously come under pressure due to the pricing in of interest rate hikes,” said Carsten Fritsch, commodity analyst at Commerzbank AG.
Market Context
Investors are now focused on a series of central bank meetings this week, including the Fed's rate decision on Wednesday, the first under new Chair Kevin Warsh. The Bank of Japan also raised rates to a 31-year high on Tuesday, adding to the global tightening narrative.
For more on market movements, see our coverage of Rocket Lab Stock Plunges 55% and Ethereum Holds Above $1,900.
This article is for informational purposes only and does not constitute financial advice.
