On Monday, the US-Iran conflict entered its 150th day. Iran will reportedly stop its attacks as long as the United States continues its current pause on air strikes after President Donald Trump unexpectedly paused a bombing campaign that had lasted nearly two weeks.
The pause follows 13 consecutive nights of U.S. strikes on Iranian targets, with the Pentagon halting the operation late on Friday. No U.S. attacks have been reported since, marking the first two-day break in the campaign.
Oil prices eased in early trading Sunday, falling further from a two-month high set last week, after the United States and Iran refrained from launching military strikes in the Persian Gulf for a second straight day.
The price for a barrel of to be delivered in September dropped 4.9% to $92.02 shortly after trading resumed. The decline followed a 3.9% drop on Friday.
Brent crude, the international standard, briefly hit $102 a barrel last week. That was $30 more than the most actively traded contract in the Brent market was going for early in the month, and the highest it had been since May.
Oil prices surged this month because of increased fighting in the Middle East and worries that a return to all-out war would further slow the global flow of crude.
The U.S. military had earlier said that its naval blockade of Iran remained fully operational but did not explain the pause in airstrikes. A senior Trump administration official said diplomacy remained the president’s preference, though Iran had been shown the consequences of refusing serious negotiations.
However, I find the current scenario remains uncertain, as tensions have shifted toward the Red Sea following attacks by Iran-aligned Houthi forces on Saudi Aramco facilities in Jizan and Yanbu.
Additionally, another front has emerged in the Caspian Sea, where Iran accused Ukraine of attacking an Iranian commercial vessel, resulting in one fatality and one injury.
Washington and Tehran remain in talks, though Trump said Iran was not yet ready for an agreement. The U.S. blockade and threats against Red Sea energy infrastructure leave global oil supplies exposed despite the temporary pause in direct attacks.
I observe that despite starting the first day of this week with a gap-up at $4,091.70, tested the day’s high at $4,096.05 and the day’s low at $4,08725, and are trading at $4,094.85, signaling weakness, as they find it difficult to sustain above the immediate resistance at the 20 EMA ($4,098.46).
Undoubtedly, a breakdown below the immediate support at the 9 EMA ($4,075) could push the futures to test the next support at $4,042. A breakdown below this could trigger a sell-off in today’s session, as this bump is only supported by a weaker U.S. dollar, as investors weigh a pause in Middle East hostilities while awaiting this week’s U.S. Federal Reserve policy meeting.
I conclude that surging weakness in oil prices has also supported this reversal in gold futures, but everything looks uncertain, as despite the current pause, both sides have warned they remain prepared to resume military action if talks break down.
Secondly, despite the easing in hostilities, traders remained cautious as shipping disruptions persisted. Fewer commodity vessels transited the Strait of Hormuz each day over the weekend, while traffic through the Bab el-Mandeb Strait also slowed after Houthi attacks on Saudi oil facilities.
However, Market participants are now focused on the Federal Reserve’s policy decision later this week. The central bank is widely expected to leave interest rates unchanged on Wednesday, but traders will closely scrutinize Chair Kevin Warsh’s remarks for clues on the timing of future rate cuts and policymakers’ assessment of inflation risks.
Investors will also monitor upcoming U.S. economic data, including inflation and labor market indicators, for further signals on the Fed’s policy path.
Disclaimer: Readers are advised to take any position in gold at their own risk, as this analysis is based only on observations.
