Oil prices climbed about 6% on Monday to surge back over $100 per barrel as the US military prepared to block vessels leaving Iranian ports in the Strait of Hormuz.
Both Brent and West Texas Intermediate crude oil benchmarks had surged more than 7% earlier in the day, but gave back some of the gains.
Meanwhile, gold continued to struggle as inflation concerns ramped up after energy prices jumped. A stronger dollar also nerfed both gold and silver on Monday.
Among base metals, aluminium prices on the London Metal Exchange rose to their highest levels in four years due to concerns about supply.
Oil jumps back above $100
Oil prices surged on Monday to surpass $100 a barrel on Monday. But prices gave back some of the gains, and briefly fell below the three-figure mark.
This spike was driven by escalating fears of energy supply disruptions, stemming from the breakdown of weekend peace talks and increased geopolitical tension.
The US military’s announcement of a blockade on ships departing Iranian ports prompted a retaliatory threat from Tehran against the ports of its Gulf neighbors.
Physical crude barrels destined for immediate delivery in Europe were commanding even higher prices. Certain grades have already reached approximately $150 a barrel, setting new record highs, according to a Reuters report.
Two tankers with Iranian links left the Gulf on Monday. This development comes as other vessels have begun to steer clear of the Strait of Hormuz, a critical maritime choke point that sees approximately 20% of the world’s oil and liquefied natural gas traffic.
On the other hand, despite higher prices, US drilling remained subdued.
As of April 10, the US oil rig count was unchanged at 411, per Baker Hughes data, with price volatility and weaker margins deterring investment. Total rigs dropped by three to 545, 38 fewer than a year ago.
Meanwhile, the Organization of the Petroleum Exporting Countries reduced its projection for global oil demand in the second quarter by 500,000 barrels per day. This revision contributed to cutting the earlier gains seen in crude futures prices.
At the time of writing, the price of Brent was at $99.82 per barrel, up 4.8%, while WTI was around $100.57 a barrel, up 3.8% from the previous close.
Gold slips
A stronger dollar and renewed inflation worries, which dimmed the prospect of future interest-rate cuts, caused gold prices to fall on Monday. This decline followed the collapse of US-Iran peace talks over the weekend.
As the US dollar appreciated, metals priced in the greenback became more costly for those holding other currencies.
The surge in oil prices past $100 a barrel, which followed the announcement, intensified fears of inflation. This spike limits the ability of central banks to lower interest rates.
Even though gold is viewed as a hedge against inflation, high interest rates make the zero-yield metal less attractive.
The COMEX gold contract was last at $4,763.76 per ounce, down 0.5%, while silver was at $75.743 per ounce, down 1%.
“The selloff highlighted gold’s newfound vulnerability to geopolitical risk while destroying its reputation as a ‘safe haven’ in difficult times,” said David Morrison, senior market analyst at Trade Nation.
Instead, the main driver of the gold price appears to be the US dollar, as the two seem to be negatively correlated in investors' minds – a relationship which can appear solid, until it suddenly falls apart.
For a more sustained rally to begin, bulls will aim for a break and a sustained hold above the $4,800 level, Morrison added.
Aluminium hits four-year high
Geopolitical instability in the Middle East has driven aluminium prices to a more than four-year peak, escalating worries about both production and shipments.
Specifically, the risk of further disruption to metal flows has increased following US President Donald Trump’s action to blockade the Strait of Hormuz, contributing to a rise of up to 3% in LME aluminium during the session.
The Middle East’s role as a major supplier to Europe and its approximately 9% share of global aluminum production mean the market is especially vulnerable to disruption.
“Any sustained disruption to shipping through Hormuz would tighten availability and support regional premiums, especially as inventories remain relatively lean,” Ewa Manthey, commodity strategist at ING Group, said in a note.
Elevated energy prices are adding to the upside pressure for aluminium, reinforcing cost support for smelters at a time when power markets remain highly volatile.
At the time of writing, the three-month aluminium contract was $3,614 per ton, up 2.9%, while the copper contract on LME was at $13,054.18 per ton, up 1.5%.
The aluminium contract hit its highest level since March 1, 2022.
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