Oil soars 25pc, gold drops as Iran war jolts global commodity markets

Oil prices surged around 25 per cent on Monday to their highest since mid-2022. Brent was on track for a record one-day gain. Gold fell 2pc as an escalating Iran war squeezed world energy supplies. This situation boosted the dollar and dampened hopes of interest-rate cuts.

Agriculture markets rose, led by edible oils. They took their cue from oil prices. This is due to the extensive use of vegetable oils in making biofuels. Aluminium firmed on supply worries even as other metals faced headwinds from a stronger dollar.

“The violent reaction stems from the markets seeing no obvious offramp in the escalating ⁠Middle East conflict. It is now a high-stakes standoff. Neither side appears willing to blink first,” Tony Sycamore, IG market analyst, said in a note.

“The risk of more lasting economic damage continues to build by the day.”

Iran on Monday named Mojtaba Khamenei to succeed his father, Ali Khamenei as Supreme Leader.

Soaring oil lift vegoils, grains

Brent was on track for its biggest one-day gain ever in both percentage and absolute terms. This surge was driven by the expanding US-Israeli war with Iran. Consequently, some major Middle Eastern oil producers cut supplies. There were also fears of prolonged disruption to shipping through the Strait of Hormuz chokepoint.

Brent crude futures climbed to a high of $119.50 per barrel ‌, and US ⁠West Texas Intermediate (WTI) to $119.48 a barrel.

“…the situation appears to be deteriorating further,” ING analysts said in a note. “In addition, upstream oil production has started to shut in, with producers facing storage constraints. Iraq, Kuwait, and the UAE began reducing oil production.”

In agricultural markets, Malaysian palm oil rose 9pc. Chicago soybean oil climbed to its highest since late 2022. These increases are buoyed by the crude oil rally. Wheat rose to its highest ⁠since June 2024, and corn prices hit a 10-month high.

Gold fell more than 2pc. A stronger dollar weighed on greenback-priced bullion. Higher energy costs fuelled inflation concerns. This further dimmed the prospects for near‑term reductions in interest rates.

The dollar hovered near a three-month high hit last ⁠week, making bullion more expensive for holders of other currencies.

Oil-driven inflation fears likely strengthened US yields and the dollar. Delayed rate-cut expectations also contributed. These factors outweighed safe-haven demand, pushing gold down.