Middle East Tensions and US Labor Market to Influence Commodity Markets Next Week

Diplomatic Signals Shift in West Asia, Reshaping Commodity Markets

A week of shifting diplomatic signals from West Asia has significantly impacted commodity markets, with growing optimism over a potential US-Iran ceasefire extension prompting a rapid unwinding of war risk premiums built up over three months of conflict. The mood has swung from fears of prolonged supply disruption to cautious hope for de-escalation, with crude bearing the brunt of the reversal.

The US dollar held near 99 for most of the week, caught between two competing forces. A slightly softer monthly US inflation print eased some concern that elevated energy prices would keep broader price pressures elevated, while several Federal Reserve officials retained a cautious tone that kept rate cut expectations muted. This tension in the dollar's performance had a ripple effect on global markets.

US Equities Finish the Week Higher

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US equities finished the week higher, with the Nasdaq leading with gains of over 2 percent after reports that US and Iranian negotiators had reached a breakthrough on a peace framework, raising the prospect of lower energy costs ahead. This development was a significant boost to investor sentiment and led to a surge in US equities.

Precious Metals Experience a Turbulent Week

Precious metals had a turbulent week as investors balanced the prospect of a peace agreement with the risk that lingering instability near the Strait of Hormuz could keep energy-led inflation elevated and interest rates higher for longer. Spot Gold fell to $4,365 an ounce, and silver slid under $72 per ounce, the lowest since April, as renewed military exchanges mid-week and continued diplomatic uncertainty shook confidence. However, by Friday, both metals recovered sharply as ceasefire extension reports gained credibility, with gold climbing back above $4,590 and silver surging above $76.

MCX Gold Futures: A Sideways to Mildly Bullish Bias

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MCX Gold Futures on the daily chart are exhibiting a sideways to mildly bullish bias after a sharp rally earlier in the month. Following five consecutive negative daily sessions, prices staged a strong rebound on Thursday from the Rs 151,500 per 10-gram support zone, indicating buying interest at lower levels; however, the recovery lacked follow-through on Friday, keeping the market in consolidation mode.

Gold & Silver Rates Yesterday

Crude Oil Posts Its Steepest Weekly Fall Since Early April

Crude oil posted its steepest weekly fall since early April. Brent dropped roughly 11 percent, and WTI fell over 9 percent, as reports emerged that US and Iranian negotiators had agreed on a proposed 60-day ceasefire framework tied to renewed nuclear talks. The deal, which still requires approval from President Trump and sign-off in Tehran, reportedly includes Iran removing mines from the Strait of Hormuz and guaranteeing free commercial shipping through the waterway.

Base Metals Deliver a Mixed but Broadly Resilient Performance

Base metals delivered a mixed but broadly resilient performance. Copper eased slightly over the week but ended May nearly 5 percent higher, supported by steady manufacturing demand and tightening supply conditions. Production constraints in Chile, shortages affecting smelters, and falling LME inventories all provided a floor, while early shipments into the US ahead of potential tariff measures further reduced available global supply.

The Week Ahead: Pivotal Questions Remain

The week ahead, starting from June 1, will be pivotal. The key questions are whether the reported ceasefire framework is formally approved and whether the specific terms on Strait of Hormuz access hold. As of the weekend, there is no confirmation that President Trump has signed off on the deal, while an adviser to Iran's Supreme Leader publicly accused Washington of overreach, signalling that Tehran's position remains unsettled. The US military has also made clear it stands ready to resume operations in the Gulf if needed, reminding markets that geopolitical risks have diminished but not disappeared.

Macroeconomic Front: A Focus on Global PMI Readings, Central Bank Remarks, and the US Jobs Report

On the macroeconomic front, final global PMI readings, remarks by central bank and treasury officials, and most importantly, the US jobs report will be market focal points. With so much unresolved on both the geopolitical and macro fronts, commodity markets are likely to remain sensitive to headlines and prone to sharp moves in either direction.