Sector Update: Financial

Update: WTI Oil Closes at a Six-Week Low on Reports Iran and the U.S. May be Nearing a Peace Deal

West Texas Intermediate (WTI) crude oil closed at six-week Friday on reports the United States and Iran will extend their tenuous ceasefire while a Trump Administration official said the two sides are nearing a deal to end the war.WTI crude oil for July delivery closed down $1.54 to settle at US$87.36 per barrel, the lowest since April 17, while July Brent oil was last seen down $1.74 to US$91.97.The Wall Street Journal reported U.S. Treasury Secretary Scott Bessent said the Trump Administration is near a deal to end the war, which enters its fourth month today. The paper said President Trump is pressing for Iran to for a commitment to surrender its stocks of enriched uranium and fully reopen the Strait of Hormuz. Thursday reports that the two countries have extended a ceasefire for 60 days is also pressing prices.The Strait has been mostly closed to shipping since the Feb. 28 start to the war, blocking exports from the Persian Gulf nations that supplied 20% of daily oil demand. A peace deal could see shipping resume, but Iran is likely to maintain control of the waterway once hostilities end."Any end to the conflict that leaves Iran exercising operational control and influence over the Strait will result in appreciably lower flows through the waterway in our view. Moreover, we struggle to see how a sizeable number of Western shipping companies will be willing to risk transiting the waterway even if a 60-day MoU is inked, given the ever-present risk of recurrent rounds of military action involving missiles, drones, and mines. These factors are compounded by extremely elevated insurance rates as well as the legal difficulties associated with paying or coordinating with IRGC entities under US sanctions," Helima Croft, Head of Global Commodity Strategy and MENA Research at RBC Capital Markets, wrote.Still, hopes for a full return of Persian Gulf have cut into oil prices, which posted their largest monthly drop in six years on expectations for a peace deal. However prices are not expected to soon return to pre-war levels as importing countries rebuild depleted inventories."While significant hurdles remain, the market is reacting to the prospect of a supply surge once hundreds of tankers loaded with crude oil and refined fuels are released from the Persian Gulf. In the months ahead, however, demand to replenish depleted global inventories is likely to provide support, potentially lifting the price floor compared with pre-war levels," Saxo Bank noted.

July WTI Crude Oil Contract Closes Down US$1.54; Settles at US$87.36 per Barrel

Update: Gold Trading Higher Again on Expectations the U.S. and Iran are Near a Peace Deal

(Updates prices.)Gold traded higher for a second day midafternoon on Friday as the dollar weakened on expectations the U.S. war on Iran is nearing an end, pushing oil prices lower and easing the inflation worries that have pushed up the currency.Gold for July delivery was last seen up US$60.70 to US$4,593.10 per ounce.The Wall Street Journal reported U.S. Treasury Secretary Scott Bessent said the Trump Administration is near a deal to end the war, which enters its fourth month today. The paper said President Trump is pressing Iran for a commitment to surrender its stocks of enriched uranium and fully reopen the Strait of Hormuz. Thursday reports that the two countries have extended a ceasefire for 60 days, are also pushing oil prices lower and easing worries energy inflation will force central banks to raise interest rates."The easing of energy-driven inflation concerns helped push bond yields and the dollar lower, providing support to bullion," Saxo Bank noted.The dollar fell, with the ICE dollar index last seen down 0.13 points to 99.06. Treasury yields eased, with the U.S. two-year not last seen paying 4.01%, down 2.1 basis points, while the yield on the 10-year note was unchanged at 4.448%.