[TMGM Financial Breakfast] U.S.-Iran Ceasefire Sends Oil Prices Tumbling and Gold Higher Ahead of This Week's Fed Decision
The sudden halt in military confrontation between the United States and Iran triggered immediate reactions across global financial markets. International oil prices opened sharply lower on Monday, easing inflation concerns, while spot gold opened more than US$40 higher. Meanwhile, U.S. stock index futures rallied across the board, with S&P 500 futures gaining 0.65% and Nasdaq futures rising 1.2%.
Behind these market moves was the Trump administration's decision to leave room for renewed diplomatic negotiations with Iran, accompanied by Tehran's announcement that it would suspend retaliatory military actions. However, whether gold's rebound can be sustained will depend on whether tensions in the Middle East genuinely ease, the clarity of the Federal Reserve's policy outlook, and how markets reprice inflation and interest rate expectations.
The U.S. Ambassador to the United Nations stated that, after Iran experienced two consecutive nights without airstrikes, President Donald Trump decided to allow additional space for diplomatic efforts. At the same time, the Iranian military announced it would suspend retaliatory attacks against U.S. allies in the Middle East, citing the absence of U.S. military strikes over the previous two nights.
Although the two countries reached a ceasefire agreement in April and signed a 60-day memorandum of understanding for peace talks in June, tensions recently flared up again over control of the Strait of Hormuz. An Iranian military spokesperson emphasized that Iran's actions were retaliatory in nature and warned that the situation would escalate further if the United States resumed military operations, particularly airstrikes. The temporary halt in hostilities has renewed hopes that both sides could return to negotiations. Prior to the ceasefire, Iran had once again closed the Strait of Hormuz after fighting resumed and reportedly detained six vessels attempting to pass through the waterway within the past 24 hours.
The pause in military action immediately eased market concerns over supply disruptions through the Strait of Hormuz. The decline in oil prices helped reduce inflation fears and eased pressure for further Federal Reserve rate hikes. The U.S. dollar index opened lower and continued to weaken, while gold, benefiting from lower oil prices and temporarily easing geopolitical tensions, rebounded quickly and climbed back above the US$4,050 level.
If the conflict escalates sharply again, prices could still fall below key support levels and trigger stop-loss orders. Nevertheless, gold appears positioned for another upward move, particularly if the Federal Reserve confirms next week that interest rates will remain unchanged. Recent strength in gold has largely been driven by bargain hunting and short covering after prices retreated significantly from the record highs reached earlier this year. However, elevated oil prices and rising bond yields could limit any further gains, making US$4,000 an important support level to watch in the near term.
Market Insight:
On the 4-hour chart, gold has staged a strong rebound, with both the MACD lines and histogram expanding around the zero line, indicating improving bullish momentum.
Global financial markets face several major tests this week. The Federal Reserve is scheduled to announce its latest interest rate decision on Wednesday, with markets widely expecting the federal funds rate to remain unchanged at 3.50%–3.75%.
Gold's long-term appeal as both a safe-haven asset and an inflation hedge has not changed simply because military action has temporarily paused. Investors should closely monitor the Federal Reserve's policy statement, developments in the Iran situation, and upcoming economic data releases throughout the week.
