Oil prices fall on progress in US-Iran peace negotiations

Asian markets were mixed, with Japan‘s Nikkei 225 surging 1.95% to a new record above 72,000, while South Korea’s Kospi gained 1.2%. Hong Kongs Hang Seng dropped 1.7%. Oil prices reversed earlier gains after reports that U.S. and Iranian officials agreed on a roadmap to finalize a peace deal within 60 days. Brent crude slipped 0.38% to $80.26 per barrel, while WTI crude held a smaller gain of around 1% at $77.52.

Reports last week showed the U.S. Strategic Petroleum Reserve (SPR) has fallen to 340.3 million barrels, its lowest level since 1983, after emergency releases aimed at offsetting supply disruptions caused by the Iran conflict. Any delay in restoring exports through Hormuz or renewed geopolitical tensions could quickly push crude prices higher again.

U.S. stock futures moved lower on Monday as investors monitored developments in U.S.-Iran peace negotiations and awaited this weeks key inflation data. S&P 500 futures fell 0.5%, Nasdaq 100 futures declined 0.6%, and Dow futures lost 0.4%.

Investors are now focused on Thursday‘s Core PCE inflation report, the Federal Reserve’s preferred inflation measure. Economists expect inflation to accelerate compared to April. Following the Fed‘s hawkish meeting last week, markets have brought forward expectations for a potential rate hike to as early as October, making this week’s inflation data especially important.

Gold prices rebounded on Monday, climbing back above $4,200 per ounce and ending a three-day losing streak. The recovery was supported by lower oil prices after Qatar and Pakistan announced a 60-day roadmap toward a final U.S.-Iran peace agreement, easing concerns about energy-driven inflation.

However, gains in gold remain limited as markets continue to price in a nearly 90% probability of a Federal Reserve rate hike by year-end following last week‘s hawkish Fed meeting. Fed Chair Kevin Warsh reinforced the central bank’s commitment to fighting inflation, suggesting policymakers are unlikely to cut rates quickly even if economic growth slows.