Crude Prices Remain Above $112 Amid Escalating Iran Tensions, Gold Continues Downward Trend

Commodity Markets Trade Mixed Amid Escalating Global Tensions

Commodity markets experienced a mixed day on May 18, with crude oil extending its gains while precious and base metals remained under pressure due to escalating geopolitical tensions, inflation concerns, and rising bond yields.

Brent Crude Surges as Tensions Rise

Brent crude advanced towards $112 a barrel, a significant increase from its nearly 8 percent rise last week. Meanwhile, West Texas Intermediate crude traded above $108 a barrel. The surge in oil prices can be attributed to President Donald Trump's renewed threats against Iran, which has led to increased volatility in the markets.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Escalating Tensions Drive Oil Prices Higher

Crude prices have surged more than 50 percent since the US and Israel first attacked Iran at the end of February, with restricted flows through the Strait of Hormuz tightening global oil supply from Persian Gulf producers. The recent drone attack on a nuclear plant in the United Arab Emirates has further highlighted the fragile situation in the Middle East, keeping markets on edge.

Base Metals Trade Lower Amid Broader Weakness

In the base metals segment, prices traded lower due to broader weakness across commodity markets. Copper declined around 1 percent, while aluminium and zinc also moved lower as investors remained cautious over global growth and industrial demand.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Gold Prices Extend Losses

Gold extended losses as persistent disruptions in the Strait of Hormuz fueled inflation concerns and pushed global bond yields higher. Spot gold fell as much as 1.3 percent to around $4,480 an ounce after declining nearly 4 percent last week. Silver dropped 2.5 percent to $74.06 an ounce after falling more than 5 percent during the previous week.

Market Expectations and Interest Rates

Market participants said rising oil prices and inflation concerns are increasing expectations of higher interest rates, weighing on non-yielding assets such as gold. Bullion has largely traded in a narrow range after the sharp correction seen in the early phase of the conflict, as investors balance inflation risks against concerns over slowing global growth and possible monetary easing if the conflict prolongs further. Gold prices are now down around 15 percent since the conflict began.