Trump's Warning Sends Crude Oil Prices Soaring and Precious Metals Plummeting

Its topsy turvy day in the commodity markets today. Crude oil prices spiked 5% and precious metals nosedived almost as much in just 30 minutes. This is after US President Donald Trump , in a televised address, said that Washington will strike Tehran “extremely hard” over the next two to three weeks. Trump’s stance on Iran has kept the markets on tenterhooks. Earlier on Tuesday, the US President had said that Washington could stop attacking Tehran. During his speech from the White House , Trump said that his core objectives pertaining to Iran are nearing completion, also stating that the US is prepared to intensify its military operations in the coming time frame. “By saying core strategic objectives are nearing completion in the Iran war, Trump signals near-term finality to the West Asian crisis. In the next 2 to 3 weeks, either the escalation could increase substantially, including attacks on Iranian power and crude facilities, or some deal could be achieved,” said Garima Kapoor, Deputy Head of Research and Economist at Elara Capital. Crude oil markets quickly reacted to Trump’s remarks as Brent crude and West Texas Intermediate futures both rose by nearly 5%. Brent was quoted around the $106/bbl mark, while US crude was near the $104/bbl level. On Wednesday, both the benchmarks had slipped below the $100/bbl mark as Trump had remarked that Washington is preparing to wind down the month-long war. Global energy flows remain disrupted as Iran continues to cement control over the crucial waterway passage—the Strait of Hormuz , which transits nearly 20% of global oil. However, Kapoor believes that movement through the trade route will resume soon. She adds, “We believe, as US-Iran escalation ends, the cost of insuring vessels passing through Hormuz would come down too, allowing gradual movement of energy to resume in Hormuz.” Kapoor adds that uncertainty will prevail in the near term, with crude oil prices remaining firm, even as hopes have been offered for closure of the war within the next 2 to 3 weeks. “So far, Iran doesn’t seem to be buckling under any pressure from America, but America’s degrees of freedom are reducing, suggesting limited ability to continue longer. We see a finality to the war soon. Heightened volatility is likely to persist in the short term,” the economist adds. After witnessing a steady session on Wednesday, gold and silver prices have again tumbled. Spot gold prices fell by more than 2% below the $4,700/oz mark over Trump’s remarks, quoted near the $4,691/oz mark as crude prices soared. Spot silver was down 4% from its highs of $75/oz, quoted near the $72/oz level, as reports came in that Trump will hit Tehran “extremely hard”. Rising concerns over high oil prices have stoked inflationary concerns worldwide, with central banks globally shifting towards a more hawkish stance. Following Trump’s address, the dollar index too climbed, which weighed on bullion as a firm dollar makes precious metals like gold and silver more expensive for holders of other currencies, thereby decreasing demand.