Oil Tumbles on Iran Hopes, Precious Metals Hit by Stronger Dollar

AFP/APP

Hong Kong: Oil prices slumped on Monday as easing tensions between the United States and Iran dented risk premiums, while precious metals came under renewed pressure from a surging dollar following last week’s sharp sell-off.

The retreat spilled over into equity markets, with most Asian indexes tracking losses on Wall Street and extending Friday’s decline amid fresh concerns over the technology sector.

Both major crude contracts fell more than three percent in early Asian trade after US President Donald Trump said he was hopeful of reaching a deal with Tehran, following warnings from Iran that any attack on the Islamic republic would spark a regional conflict.

Washington has sharply criticized Iran’s leadership in recent weeks over its deadly response to anti-government protests last month. Trump had earlier threatened military action and ordered the deployment of an aircraft carrier group to the Middle East, while also pressing for a renewed agreement on Iran’s nuclear programme.

On Sunday, Iran’s Supreme Leader Ayatollah Ali Khamenei likened the recent unrest to a “coup” and warned that any US military action would have serious consequences.

“The Americans should know that if they start a war, this time it will be a regional war,” he said.

Asked about the warning, Trump told reporters: “Of course he is going to say that. Hopefully we’ll make a deal. If we don’t make a deal, then we’ll find out whether or not he was right.”

Oil prices were further weighed down by a stronger US dollar, boosted by news that Trump had nominated Kevin Warsh to lead the Federal Reserve. The president described Warsh, a former Morgan Stanley banker and ex-Fed governor, as someone who “will go down as one of the GREAT Fed Chairmen, maybe the best.”

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Markets view Warsh as the most hawkish inflation fighter among the shortlisted candidates, raising expectations of tighter monetary policy that would support the greenback. His nomination also eased concerns over the Federal Reserve’s independence after Trump’s repeated criticism of current chair Jerome Powell.

The dollar surged broadly on the announcement, reversing losses from last week when markets feared the White House was comfortable with a weaker currency.

Stephen Innes of SPI Asset Management said the appointment carried clear policy implications.

“People do not get handed the keys to the most powerful central bank on earth because they plan to drive in the opposite direction of the people who gave them the keys,” he said.

“The Fed may be independent, but personnel is policy, and this appointment was unlikely to have been made in a vacuum.”

The stronger dollar hammered dollar-denominated precious metals. Gold plunged as much as 12 percent on Friday, while silver dropped more than 30 percent at one point. Losses extended on Monday, with gold sliding up to six percent to $4,586 and silver briefly falling around 11 percent to $75. Both later recovered slightly but remained well below last week’s record highs of $5,595 and $121, respectively.

Easing Iran tensions also reduced demand for gold and silver, which are traditionally sought as safe-haven assets during periods of uncertainty.

Equity markets across the region remained mostly in the red after a Wall Street sell-off driven by renewed doubts over the scale of investment in artificial intelligence and the timing of expected returns.

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Seoul, which has posted multiple record highs this year due to its heavy tech weighting, fell more than two percent. Hong Kong, Shanghai, Sydney, Singapore, Taipei and Manila also declined, while Tokyo edged higher.

Key figures at around 0230 GMT:

Tokyo – Nikkei 225: ▲ 0.2% at 53,422.01

Hong Kong – Hang Seng Index: ▼ 1.7% at 26,919.07

Shanghai – Composite: ▼ 0.8% at 4,083.84

Euro/dollar: $1.1870 (from $1.1856)

Pound/dollar: $1.3693 (from $1.3688)

Dollar/yen: 155.00 yen (from 154.64)

Euro/pound: 86.68 pence (from 86.63)

West Texas Intermediate: ▼ 3.5% at $62.92 per barrel

Brent North Sea Crude: ▼ 3.3% at $67.02 per barrel

New York – Dow: ▼ 0.4% at 48,892.47 (close)

London – FTSE 100: ▲ 0.5% at 10,223.54 (close)