Gold prices recovered while oil extended a sharp sell-off on Monday as investors increasingly positioned themselves for a possible easing of tensions between Washington and Tehran, raising expectations that inflation pressures and disruptions to global energy flows could gradually subside.
The simultaneous rebound in bullion and retreat in crude reflected a broader reassessment across global asset classes after weeks dominated by wartime supply fears, surging energy costs, and aggressive inflation hedging linked to the conflict surrounding the Strait of Hormuz.
Spot gold rose as much as 1.6 per cent to around $4,580 an ounce, recovering part of last week’s decline as softer oil prices eased fears of a prolonged global inflation shock. Silver climbed more than 3 per cent, while platinum and palladium also advanced amid broader gains across precious metals.
The move followed comments from US officials suggesting diplomatic progress with Iran, although final approval of any agreement could still require several days of negotiations. US President Donald Trump said he would not “rush” into an agreement before negotiations were fully completed, while Secretary of State Marco Rubio indicated that “some good news” regarding Hormuz could emerge soon.
Despite Monday’s rebound, gold remains roughly 13 per cent below levels reached during the peak of the conflict earlier this year, when disruptions to Gulf energy supplies fuelled inflation expectations and triggered aggressive repositioning across commodity markets.
Analysts said bullion’s recovery reflected growing expectations that lower energy prices could eventually reduce pressure on central banks to maintain restrictive monetary policies. US Treasury yields eased modestly during Asian trading, while the Bloomberg Dollar Spot Index weakened around 0.3 per cent, offering additional support for precious metals.
Financial markets have increasingly priced in the possibility that the Federal Reserve could maintain elevated interest rates into late 2026 following the earlier surge in energy-driven inflation. Investors are also closely monitoring the policy outlook under incoming Federal Reserve Chair Kevin Warsh, whose stance on inflation and rates is expected to become a key driver for bullion markets in the months ahead.
“Markets have seen several rounds of optimistic headlines fade without concrete progress,” said Justin Lin, analyst at Global X ETFs in Sydney, adding that investors still required clearer evidence of sustained cooperation before materially reducing geopolitical hedges.
Christopher Wong, strategist at Oversea-Chinese Banking Corp, said investors remain cautious about aggressively extending gold’s rebound while uncertainty continued surrounding Iran’s nuclear programme and the final structure of any agreement.
Meanwhile, oil prices continued to unwind a geopolitical premium that had rapidly accumulated since conflict escalated in February between Iran, Israel, and the United States.
Brent crude fell more than 6 per cent intraday to below $100 a barrel, trading near $97, while US West Texas Intermediate crude dropped toward $91.
The decline marked Brent’s fourth loss in five sessions and pushed prices toward their lowest closing levels in more than a month as traders reassessed worst-case disruption scenarios surrounding Gulf energy exports.
Although shipping through Hormuz remains heavily constrained, limited tanker traffic has gradually resumed under heightened military monitoring and elevated insurance costs. The waterway normally carries nearly one-fifth of global oil and liquefied natural gas trade, making any improvement in transit conditions particularly important for major Asian importers including China, Japan, and South Korea.
Several core disputes nevertheless remain unresolved, including Iran’s nuclear programme, sanctions relief, and the release of frozen Iranian assets. Iranian media outlets also warned that disagreements over key provisions could still derail the proposed framework.
The retreat in crude prices has also become politically significant in Washington ahead of November’s midterm elections, as the White House faces mounting domestic pressure over fuel costs and inflation. Senior economic adviser Kevin Hassett said lower energy prices following a potential agreement could create additional room for future US interest-rate cuts.
Taken together, the diverging movements in gold and oil underscore how investors are cautiously repositioning away from worst-case wartime assumptions without fully abandoning protection against renewed geopolitical instability.
For now, bullion markets appear to be benefiting from softer inflation expectations and weaker dollar positioning, while oil traders continue dismantling part of the war-driven risk premium that dominated global energy markets for months. Yet both asset classes remain highly sensitive to diplomatic setbacks, underscoring how fragile the current market optimism remains in the absence of a durable political settlement capable of fully stabilising shipping flows, inflation expectations, and global energy supply chains.
