Commodity wrap: bullion plummets to over 1 month low; Brent hits $119

Most non-agricultural commodities have been experiencing a free-fall on Thursday except oil and gas as markets digests a hawkish tone from the US Federal Reserve and simmering tensions in the Middle East. 

Gold prices fell more than 5% as soaring energy prices stoked inflation concerns, limiting hopes for interest rate cuts by global central banks. 

Silver prices on COMEX plummeted over 10% to below $70 per ounce on Thursday as the metal remained volatile. 

Meanwhile, base metals prices also plunged deep into red, with the three-month aluminium contract dipping 5% and copper 2% from the previous close. 

However, Brent crude oil jumped to over $119 per barrel briefly as Iran attacked energy facilities across Saudi Arabia, the United Arab Emirates and Qatar. 

Gold plunges

Gold prices experienced a significant decline of over 5% on Thursday, marking their seventh straight session of losses.

This drop was fueled by mounting inflation worries, which were exacerbated by the Middle East conflict's impact on energy prices. 

The COMEX gold contract last traded at $4,616.65 per ounce, its weakest level since February 2, while silver plunged to as low as $65.638 per ounce. 

Consequently, expectations are rising that major central banks will maintain high borrowing costs.

Despite sharply higher energy prices fueled by the Iran conflict, major central banks maintained a hawkish stance.

However, they acknowledged the profound uncertainty surrounding the war's global economic impact, leading them to stress caution regarding upcoming policy decisions.

The European Central Bank chose to maintain current interest rates at Thursday's meeting.

For the time being, the central bank will view the surge in energy prices as a temporary event, but it will continue to monitor the situation closely.

On Wednesday, the US Federal Reserve kept interest rates steady as well.

“While geopolitical tensions typically support safe‑haven demand, the inflationary impact of higher energy costs is weighing on gold,” Ewa Manthey, commodities strategist at ING Group, said in a note. 

“It’s pushing real yields higher and capping the upside.”

Base metals under pressure

Base metal markets are experiencing significant downward pressure this morning.

Trading in the complex is currently being driven primarily by broader macroeconomic concerns and geopolitical conflict, largely overshadowing the influence of underlying fundamentals.

"The escalating Iran conflict, with direct strikes on major gas infrastructure and explicit threats against Gulf energy assets, has pushed energy markets into a higher risk regime and forced traders to reprice both inflation and global growth,” said Neil Welsh, head of metals market at Britannia Global Markets.

The initial expectation of a brief disruption has shifted, with the shock now viewed as more enduring. 

This persistent view is supporting oil prices near recent highs and strengthens the argument that metals should decline to account for both tighter financial conditions and a decrease in manufacturing demand.

Copper's 2026 gains have been erased, continuing a sharp monthly decline, as the metal increasingly reflects broader macroeconomic trends rather than just its fundamental supply-demand dynamics.

Currently, copper exhibits a strong inverse correlation with both oil prices and the US dollar.

A key tension exists for traders: while imminent demand destruction is a concern, any prolonged disruption near the Strait of Hormuz could simultaneously tighten the longer-term balance for power-intensive metals, introducing a prospective supply risk.

Aluminium remains a key concern, with a heightened risk of regional output disruption in the Gulf.

Smelters in this area face exposure to shipping obstructions and delays in securing necessary feedstock. 

“For now, metals are trading as collateral damage in an energy led inflation scare, and the market will look for a credible path to de-escalation in Iran or clear evidence of demand resilience,” Welsh said.

The aluminium contract on the London Metal Exchange was at $3,261 per ton, down 4.5%, while copper was 1.8% lower at $12,182.45 a ton. 

Brent surges to $119

A significant escalation in the war occurred following Israel's strike on Iran's South Pars gas field.

Iran retaliated with attacks on energy facilities throughout the Middle East, causing benchmark Brent oil prices to surge past $119 a barrel on Thursday.

At the time of writing, Brent crude was at $112.52 per barrel, up 5% from the previous close.

The price of West Texas Intermediate crude was at $96.47 per barrel, up 1.1%. 

Premiums for the Middle East benchmarks, Dubai and Oman, have reached unprecedented levels, hitting all-time highs of approximately $65 per barrel, based on information from Reuters data.

In an effort to curb rising fuel expenses ahead of the November elections, the administration of US President Donald Trump is considering lifting sanctions on Iranian oil. 

Treasury Secretary Scott Bessent indicated that the US may soon permit the release of approximately 140 million barrels of Iranian oil currently held on tankers.

On Wednesday, QatarEnergy reported that Iranian missile attacks on Ras Laffan, the location of Qatar's main Liquefied Natural Gas (LNG) processing operations, caused widespread damage to its energy hub.

Saudi Arabia stated that it intercepted and destroyed four ballistic missiles launched toward Riyadh on Wednesday, as well as an attempted drone attack on a gas facility.

Before its attacks, Iran issued evacuation warnings for several oil facilities in Saudi Arabia, the UAE, and Qatar, as it prepared to retaliate for strikes against its own energy infrastructure in South Pars and Asaluyeh.

South Pars is the Iranian part of the world's largest natural gas field, which Iran shares with US ally Qatar across the Gulf.

US President Donald Trump stated late Wednesday that Israel was responsible for the attack on the South Pars gas field.

He specifically clarified that neither the United States nor Qatar had any involvement in the incident.

“This raises fears of a more prolonged disruption to Persian Gulf energy supplies,” Warren Patterson, head of commodities strategy at ING Group, said in a note.

“The move to strike Iranian energy assets is odd, given that the US administration has been trying over the last couple of weeks to ease the upward pressure on oil prices.”

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