Gold prices lost more than 1% in European trading on Tuesday, resuming losses that were temporarily halted yesterday, under pressure from a stronger US dollar and rising global oil prices after the United States launched military strikes on Iranian sites, raising doubts about peace negotiations between Washington and Tehran.

The renewed rise in oil prices has revived inflation concerns in the United States, placing additional pressure on Federal Reserve policymakers and strengthening expectations of a US interest rate hike before the end of this year.

Price Overview

• Gold prices today: Gold prices fell 1.15% to $4,518.36, from the opening level at $4,570.55, and recorded a high of $4,580.36.

• At Monday’s settlement, gold prices rose 1.35%, marking the first gain in the past three sessions, supported by growing rapprochement between the United States and Iran.

US dollar

The dollar index rose around 0.2% on Tuesday, resuming gains that had paused in the previous session, and moving once again toward its highest level in six weeks, reflecting the rise of the US currency against a basket of major and minor currencies.

Demand for the dollar as a safe haven resumed after new US attacks on Iran increased doubts over the possibility of reaching an agreement to reopen the vital Strait of Hormuz and end the three-month-long Iranian war.

Global oil prices

Global oil prices rose by more than 3% on Tuesday, beginning to recover from five-week lows, amid renewed concerns that the Strait of Hormuz could remain closed to oil tankers, especially after the US military carried out strikes inside Iran.

Latest developments in the Iranian war

• The United States launched defensive strikes on boats and missile sites in Iran.

• US Central Command (CENTCOM) announced that the strikes came after monitoring Iranian movements to deploy boats intended to plant new naval mines in the Strait of Hormuz to threaten shipping, as well as missile sites that could target US warplanes.

• Iranian news agencies acknowledged hearing powerful explosions in Bandar Abbas and coastal areas.

• Iranian authorities confirmed that “the situation is fully under control,” signaling their commitment to the truce despite the US violations.

• The Iranian Foreign Ministry spokesman said that a US-Iran agreement is not imminent.

• An Iranian delegation led by chief negotiator Mohammad Bagher Ghalibaf and Foreign Minister Abbas Araghchi is visiting Doha for further talks regarding the potential peace agreement with the United States.

US interest rates

• According to the CME Group’s FedWatch tool, markets are currently pricing in a 56% probability that the Federal Reserve will raise interest rates in December, compared to just over 16% at the beginning of May.

• Markets are currently pricing a 99% probability that US interest rates will remain unchanged at the June meeting, while the probability of a 25 basis point rate hike stands at 1%.

• Investors are closely monitoring additional US economic data, along with comments from Federal Reserve officials, in order to reassess those expectations.

Gold outlook

Kelvin Wong, market analyst for Asia-Pacific at OANDA, said: “Even if a peace agreement is reached between the United States and Iran, the damage inflicted on oil production facilities in the Middle East may prevent oil flows from the region to the rest of the world from returning to normal quickly.”

SPDR Fund

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained virtually unchanged on Monday, keeping total holdings at 1,034.85 metric tons, the lowest level since May 8.

The euro declined in European trading on Tuesday against a basket of global currencies, resuming its losses that were temporarily halted yesterday against the US dollar, and moving lower toward its weakest levels in six weeks, under negative pressure after the United States launched defensive attacks on Iranian boats and missile sites.

Following media reports, the probability of the European Central Bank raising interest rates at its next June meeting increased. Investors are awaiting further economic data from the eurozone in order to reassess those expectations.

Price Overview

• Euro exchange rate today: The euro fell against the dollar by 0.1% to $1.1630, from today’s opening level at $1.1640, and recorded a high of $1.1643.

• The euro ended Monday’s trading up around 0.35% against the dollar, marking its first gain in the past three sessions, as part of recovery attempts from a six-week low at $1.1576.

• Aside from buying activity from lower levels, the euro recovered amid optimism that the United States and Iran may be nearing a peace agreement to end the war in the Middle East.

US dollar

The dollar index rose 0.1% on Tuesday, resuming gains that had paused in the previous session, and moving once again toward its highest level in six weeks, reflecting the rise of the US currency against a basket of global currencies.

Demand for the dollar as a safe haven resumed after new US attacks on Iran increased doubts over the possibility of reaching an agreement to reopen the vital Strait of Hormuz and end the three-month-long Iranian war.

Global oil prices

Global oil prices rebounded by more than 2% on Tuesday, beginning to recover from five-week lows, amid renewed fears that the Strait of Hormuz could remain closed to oil tankers, especially after the US military targeted Iranian boats and missile launch sites.

Latest developments in the Iranian war

• The United States launched defensive strikes on boats and missile sites in Iran.

• US Central Command (CENTCOM) announced that the strikes came after monitoring Iranian movements to deploy boats intended to plant new naval mines in the Strait of Hormuz to threaten shipping, as well as missile sites that could target US warplanes.

• Iranian news agencies acknowledged hearing powerful explosions in Bandar Abbas and coastal areas.

• Iranian authorities confirmed that “the situation is fully under control,” signaling their commitment to the truce despite the US violations.

• The Iranian Foreign Ministry spokesman said that a US-Iran agreement is not imminent.

• An Iranian delegation led by chief negotiator Mohammad Bagher Ghalibaf and Foreign Minister Abbas Araghchi is visiting Doha for further talks regarding the potential peace agreement with the United States.

Opinions and analysis

Charu Chanana, chief investment strategist at Saxo in Singapore, said: “Markets are justified in reflecting some optimism, because even the mere possibility of reopening the Strait of Hormuz reduces major risks related to oil, inflation, and global growth.”

Chanana added: “Optimism surrounding negotiations should not be confused with permanent de-escalation. The real test is not the main agreement itself, but whether oil tankers can sail freely, insurance premiums decline, and energy flows return to normal.”

European interest rates

• Reuters sources last week: The European Central Bank is highly likely to raise interest rates in June, given inflation expectations that are moving toward an undesirable scenario.

• Money markets are currently pricing the probability of the European Central Bank raising interest rates by 25 basis points next June at around 60%.

• Investors are awaiting further economic data from the eurozone on inflation, unemployment, and wages in order to reassess the above expectations.

The Japanese yen declined in Asian trading on Tuesday against a basket of major and minor currencies, resuming its losses that were temporarily halted yesterday against the US dollar, and moving back near its lowest levels in three weeks, driven by renewed demand for the US currency as a safe haven, especially after the United States launched defensive attacks on boats and missile sites in Iran.

Sources confirmed that those violations would not affect the course of the advanced peace negotiations between Washington and Tehran, as intensive diplomatic efforts continue to reach a comprehensive agreement that would ensure de-escalation and stability in the Middle East.

Price Overview

• Japanese yen exchange rate today: The dollar rose against the yen by 0.1% to ¥159.00, from today’s opening level at ¥158.88, and recorded a low of ¥158.81.

• The yen ended Monday’s trading up 0.2% against the dollar, marking its first gain in the past three sessions, as part of a recovery from a three-week low at ¥159.34.

• Aside from buying activity from lower levels, the yen recovered amid optimism that the United States and Iran are nearing a peace agreement to end the war in the Middle East.

US dollar

The dollar index rose 0.1% on Tuesday, resuming gains that had paused in the previous session, and moving once again toward its highest level in six weeks, reflecting the rise of the US currency against a basket of global currencies.

Demand for the dollar as a safe haven resumed after new US attacks on Iran increased doubts over the possibility of reaching an agreement to reopen the vital Strait of Hormuz and end the three-month-long Iranian war.

Global oil prices

Global oil prices rebounded by more than 2% on Tuesday, beginning to recover from five-week lows, amid renewed fears that the Strait of Hormuz could remain closed to oil tankers, especially after the US military targeted Iranian boats and missile launch sites.

Latest developments in the Iranian war

• The United States launched defensive strikes on boats and missile sites in Iran.

• US Central Command (CENTCOM) announced that the strikes came after monitoring Iranian movements to deploy boats intended to plant new naval mines in the Strait of Hormuz to threaten shipping, as well as missile sites that could target US warplanes.

• Iranian news agencies acknowledged hearing powerful explosions in Bandar Abbas and coastal areas.

• Iranian authorities confirmed that “the situation is fully under control,” signaling their commitment to the truce despite the US violations.

• The Iranian Foreign Ministry spokesman said that a US-Iran agreement is not imminent.

• An Iranian delegation led by chief negotiator Mohammad Bagher Ghalibaf and Foreign Minister Abbas Araghchi is visiting Doha for further talks regarding the potential peace agreement with the United States.

Additional Japanese budget

Prime Minister Sanae Takaichi announced on Monday that Japan would increase its budget by $19 billion to support fuel prices and help counter rising living costs linked to the consequences of the Iranian war.

Takaichi confirmed that the additional budget would be financed through deficit-covering bonds, but added that she believes the measure can be implemented “without affecting the government bond market.”

Japanese interest rates

• Market pricing for the probability of the Bank of Japan raising interest rates by a quarter percentage point at next June’s meeting is currently stable around 60%.

• Investors are awaiting further data on inflation, unemployment, and wage levels in Japan in order to reassess those probabilities.

Iran and the United States on Monday downplayed the chances of an imminent breakthrough in the three-month-long war, as US Secretary of State Marco Rubio said Washington would either reach a good agreement with Iran or deal with it “in another way.”

Rubio told reporters in New Delhi that the United States would give diplomacy every possible chance to succeed before turning to “alternatives,” after US President Donald Trump said on Sunday that he had instructed his representatives not to rush into any agreement with Iran.

Rubio added that there is a “very serious offer on the table” regarding Iran’s ability to reopen the strait and enter into real, meaningful, and time-bound negotiations over the nuclear file, expressing hope that an agreement could be achieved.

Meanwhile, Iranian Foreign Ministry spokesman Esmail Baghaei said on Monday that Iran is negotiating to end the war, but is not currently discussing nuclear issues.

Baghaei added that a general framework had been reached, but no one could say that an agreement between the United States and Iran was imminent. He explained that the potential memorandum of understanding does not include specific details regarding the management of the Strait of Hormuz, which falls under the authority of the countries overlooking it.

Trump wrote on his Truth Social platform on Sunday that the US blockade imposed on Iranian vessels in the Strait of Hormuz would remain “fully in effect until an agreement is reached, approved, and signed.”

He added: “Both sides should take their time to reach the right agreement.”

Oil prices fell 5% to their lowest levels in two weeks on Monday as optimism grew that the United States and Iran may be nearing a peace agreement.

Points of disagreement

Trump raised expectations on Saturday when he said Washington and Tehran had “largely negotiated” a memorandum of understanding on a peace agreement that would reopen the Strait of Hormuz.

The Iranian Foreign Ministry spokesman said on Monday that Iran would not impose transit fees through the vital waterway, but added that “it is natural for there to be costs for the services provided.”

Before the conflict erupted, one-fifth of global oil and liquefied natural gas shipments passed through the strait.

Disagreements remain between the two sides over several complex issues, including Iran’s nuclear ambitions, Israel’s war in Lebanon against the Iran-backed Hezbollah militia, as well as Tehran’s demands for sanctions relief and the release of tens of billions of dollars in Iranian oil revenues frozen in foreign banks.

A senior Trump administration official, speaking on condition of anonymity, revealed the broad outlines of the issues under negotiation.

The official said Iran had agreed “in principle” to reopen the Strait of Hormuz in exchange for the United States lifting the naval blockade and for Iran to dispose of its stockpile of highly enriched uranium.

He added that the United States believes Iranian Supreme Leader Ayatollah Mojtaba Khamenei has approved the general framework of the agreement.

The official rejected claims that Iran had not agreed to dispose of its stockpile of highly enriched uranium, saying: “The issue is about how it will be implemented.”

A second senior US official said on Sunday that the proposed framework gives negotiators a 60-day deadline to reach a final agreement.

Iranian sources had previously told Reuters that “workable formulas” could be found in the coming stages to resolve the dispute over the highly enriched uranium stockpile, including reducing enrichment levels under the supervision of the United Nations’ International Atomic Energy Agency.

Fragile truce

Iran has long denied US and Israeli accusations that it seeks to acquire nuclear weapons, insisting that it has the right to enrich uranium for civilian purposes, although the enrichment levels it has reached far exceed what is required for power generation.

Trump’s popularity has been hurt by the war’s impact on energy prices in the United States, while he has also faced pressure from Congress to limit his war powers. As a result, he has repeatedly spoken about the possibility of reaching an agreement to end the conflict that began when the United States and Israel launched attacks on February 28.

A fragile truce has remained in place since early April.

Responding to critics of his handling of the negotiations and his willingness to make concessions to Iran, Trump said: “If I make a deal with Iran, it will be a good and proper deal... so don’t listen to the losers criticizing something they know nothing about.”

Any agreement that strengthens the current fragile truce would provide some relief to markets, but it would not immediately end the global energy crisis that has driven up fuel, fertilizer, and food costs.

The US-Israeli bombing campaign against Iran killed thousands of people inside Iran before it was suspended in early April. Israel also killed thousands more and displaced hundreds of thousands from their homes in Lebanon during its campaign against Hezbollah. Meanwhile, Iranian strikes on Israel and neighboring Gulf countries resulted in dozens of deaths.