Reading time: 3 min
Oil prices surged 3% and gold broke through $5,000 per ounce on Wednesday as escalating US-Iran tensions sent investors scrambling for energy exposure and safe-haven assets. The commodity rally accelerated after reports that Washington rejected Tehran’s request to change the location of planned nuclear talks scheduled for Friday.
Energy Markets React to Diplomatic Deadlock
Brent crude futures climbed $2.06 to $69.39 per barrel, while West Texas Intermediate rose $1.93 to $65.14, both gaining approximately 3%. The surge followed an Axios report citing two US officials who confirmed America’s rejection of Iran’s request to modify the talks format and venue.
The energy spike reflects mounting concerns over potential disruptions to oil flows through the Strait of Hormuz, a critical chokepoint for global energy supplies. OPEC members Saudi Arabia, Iran, the UAE, Kuwait and Iraq export most of their crude through this strategic waterway, primarily to Asian markets. “Oil would be lower without Middle Eastern sabre-rattling,” PVM analysts noted in their market commentary.
Tensions reached new heights after the US military shot down an Iranian drone that “aggressively” approached a US aircraft carrier in the Arabian Sea on Tuesday. Separately, Iranian gunboats approached a US-flagged tanker north of Oman, according to maritime sources and security consultancies.
Gold Extends Historic Rally
Precious metals continued their remarkable run for the second consecutive day, with gold climbing over 2% to $5,044.74 per ounce after Tuesday’s massive 5.9% gain – the largest single-day surge since November 2008. The metal briefly touched $5,594.82 last Thursday, setting a new record high.
“Geopolitical tensions added to haven demand after the US Navy shot down an Iranian drone in the Arabian Sea, even as markets await a fresh round of nuclear talks scheduled for Friday,” explained Renisha Chainani, head of research at Augmont. Gold April futures on COMEX traded at $5,032.24 per ounce.
In India, domestic gold prices surged with Mumbai spot rates jumping to ₹1,56,625 per 10 grams from Tuesday’s ₹1,51,529. Silver also participated in the rally, topping $90 per ounce before settling at $89.82, while platinum gained nearly 1% to $2,255 and palladium surged almost 3% to $1,807.
Technical Levels and Supply Dynamics
Analysts are watching key resistance levels closely. Jateen Trivedi from LKP Securities identified ₹1,61,000 to ₹1,63,000 as strong resistance for gold in Indian markets, with $5,100 marking a crucial level on COMEX. Support lies around ₹1,45,000 to ₹1,50,000 domestically.
Technical analyst Wang Tao expects the current gold rally to be “sharp, probably surging into the $4,950 to $5,198 range.” The metal’s strength comes as investors anticipate at least two Federal Reserve interest rate cuts in 2026, creating a favorable environment for non-yielding assets.
Meanwhile, other commodities showed mixed signals. Aluminum prices declined 12% from recent peaks but found support near ₹305-310, with analysts at Religare suggesting potential upside toward ₹335-340 despite trading below key moving averages.
Market Outlook
The commodity complex faces a critical test with Friday’s nuclear talks between the US and Iran in Oman. Tehran has indicated it’s “fully ready to hold talks with the US only on nuclear issues,” according to a senior Iranian official. However, the recent diplomatic friction over venue changes and escalating military incidents suggest negotiations may prove challenging.
Supporting oil’s bullish sentiment, US crude inventories fell 3.5 million barrels last week to 420.3 million barrels, according to the Energy Information Administration. The decline came as winter storms reduced output to the lowest level since November 2024, though the draw was smaller than the American Petroleum Institute’s 11 million-barrel estimate.
As geopolitical uncertainties persist and central bank policies remain accommodative, both energy and precious metals markets appear poised for continued volatility, with traders closely monitoring developments from the Strait of Hormuz to the Federal Reserve.
Sources: Mint, The Hindu Business Line, Economic Times, E, Nypost
