Commodities Wrap: Hopes for End to US-Iran War Rise, Crude Falls, Copper Gains, Gold and Silver Surge

Oil and natural gas prices fell sharply on Wednesday as Iran assessed a new US proposal aimed at ending the nearly 10-week war. Gold and silver posted their biggest gains in more than a month. Most industrial metals rose along with mining stocks.

Crude: Iran Weighs New US Proposal, Oil and Gas Prices Plunge

Oil and natural gas prices fell sharply on Wednesday as Iran assessed a new US proposal aimed at ending the nearly 10-week war.

Benchmark Brent crude tumbled nearly 8%, while WTI crude fell about 7%. European natural gas fell as much as 14% at one point.

Closing Prices:

• June WTI crude fell 7%, settling at $95.08 per barrel

• July Brent crude fell 7.8%, settling at $101.27 per barrel

According to a person familiar with the matter, if Iran accepts the one-page US memorandum of understanding, it would pave the way for a phased reopening of the Strait of Hormuz and the lifting of the US blockade on Iranian ports.

The person said no agreement has been reached yet, and detailed negotiations on Iran's nuclear program will take place later in the process. Trump told Fox News on Wednesday afternoon that he was "cautiously optimistic" about the two sides signing a memorandum of understanding, adding that the US war with Iran could end within a week.

"The market is trying to digest the prospect of a peace deal, but it's hard to do with changing details," said Dennis Kissler, Senior Vice President of Trading at BOK Financial Securities Inc. He added that light trading volumes also mean it doesn't take much to move prices.

The news of a potential breakthrough in negotiations was first reported by Axios. Just two days earlier, clashes in the Strait of Hormuz had pushed oil prices higher and raised fears that a US-Iran ceasefire was unraveling. Trump is under increasing pressure to end the war. Earlier Wednesday, Trump said in a Truth Social post that "bombing will begin" if Iran does not agree to the US peace proposal, which narrowed the declines in oil and gas.

According to knowledgeable sources, Tehran is expected to respond to the US proposal through mediator Pakistan within the next two days. Iran said on Wednesday it would ensure the safe passage of ships through the Strait of Hormuz under a new procedure.

"Even after this morning's sharp sell-off, indicators across oil and petroleum product markets continue to flash bullish signals," said Ryan McKay, Senior Commodity Strategist at TD Securities. He added that commodity trading advisors (CTAs) are expected to hold positions if prices continue to rise, but could slightly trim positions if prices flatline or fall amid rising volatility.

Precious Metals: Gold and Silver Surge

Gold and silver posted their biggest gains in more than a month, driven by market expectations of a potential US-Iran agreement.

On Wednesday, spot gold rose as much as 3.6%, breaking above $4,700 per ounce; silver rose as much as 6.8%. Lower energy prices pushed bond yields lower, while the dollar retreated to pre-war levels. Since gold pays no interest and is dollar-denominated, these factors are positive for it.

"With inflationary pressure concerns easing, gold investors are betting that the Federal Reserve may still pivot to rate cuts rather than maintain tight policy for an extended period," said Ewa Manthey, Commodity Strategist at ING. Gold typically performs better in a low-interest-rate environment.

As of 4:39 p.m. New York time:

• Spot gold rose 2.9% to $4,691.1 per ounce

• Spot silver rose 6.4% to $77.5081 per ounce

Base Metals: Copper Rises as Trump Signals Progress in Iran Talks

Most industrial metals rose along with mining stocks after Trump signaled the US is close to ending the war with Iran.

LME copper rose 2%, while LME tin surged more than 8%. Other risk assets, including global equities, also moved higher, while bond markets gained.

On Wednesday, the US and Iran were negotiating a new ceasefire proposal as Trump seeks to extricate himself from the conflict.

Mining stocks rose, with Rio Tinto gaining 5% in London to a record high, while copper miner Antofagasta jumped as much as 9.9%.

Since the US and Israel launched their attack on Iran in late February, metal prices have remained relatively resilient. While there are concerns about the impact on global manufacturing activity, supply has also faced significant threats.

Aluminum supply from the Middle East, a key production hub, has been affected, while a shortage of sulfuric acid from the region has threatened copper output elsewhere.

Closing Prices:

• LME copper rose 2% to $13,392 per ton

• LME aluminum fell 1.9% to $3,522.5 per ton

• LME nickel fell 2.3% to $19,199 per ton

• LME zinc rose 0.9% to $3,399 per ton

• LME tin rose 8.2% to $53,808 per ton

• LME lead rose 0.3% to $1,977.5 per ton