Oil futures are extending their decline this morning (Friday), with growing optimism over a potential US-Iran deal pushing prices to multi-month lows. WTI is trading around $70.5 per barrel, down roughly 2% from yesterday's close, while Brent slips to ~$73.7 per barrel.
The move extends a trend that began in mid-June, when reports of progress in US-Iran negotiations triggered sharp declines. The Strait of Hormuz, through which roughly 20% of global oil flows, has been effectively closed since the conflict began in February 2026, initially sending prices sharply higher. Markets are now pricing a higher probability of the waterway reopening, which would release significant crude volumes into the global market.
Why it matters
A full reopening of the Strait of Hormuz could flood the market with substantial supply, analysts estimate up to 80 million barrels could hit the market in the near term. This comes on top of expected supply surpluses in 2027 amid slowing Chinese demand.
However, there is a gap between the price relief and the physical picture. Aberdeen Investments cautions that "apparent abundance" masks inventories nearing multi-year lows, with limited spare production capacity. The risk of sharp price spikes remains elevated.
Gold, deep correction, but not a reversal
Gold continues to trade around $4,000-4,020 per ounce, after a roughly 25% correction from the all-time high of $5,589 set in January. This is the deepest pullback of the current cycle, pushing gold below its 200-day moving average for the first time since 2023.
The main driver: strong US macro data that pushed rate-cut expectations further out. The May jobs report (172,000 new jobs vs. ~80-90k expected), sticky CPI at 4.2%, and the hawkish Fed pivot at the mid-June FOMC meeting all supported a stronger dollar and higher real yields.
Yet analysts remain bullish on the longer-term outlook. Goldman Sachs cut its year-end target to $4,900 (from $5,400 pre-correction) but maintains a constructive view. JPMorgan holds its Q4 target at ~$6,000 with a 2027 potential of $6,300. Wells Fargo projects $6,100-6,300. Central bank buying continues (244 tonnes in Q1), and structural demand for gold as a hedge against fiscal deficits and de-dollarization remains intact.
Agriculture, steady on improved weather
Agricultural commodities are trading in a narrow range this morning after a quiet week. Corn is around $4.14 per bushel, soybeans at $11.24, and Chicago wheat at $5.87. Improved weather conditions across major US growing regions and easing drought concerns are relieving supply-side pressure.
USDA projections for the 2026/27 season point to an average corn price of around $4.20 per bushel and higher soybean supplies with prices around $10.30.
The bottom line
Commodity markets are navigating two opposing forces this morning. On one side, geopolitical relief is pushing oil prices lower and unwinding the risk premium. On the other, a hawkish US macro backdrop continues to pressure gold. Beneath the surface, analysts warn that the "abundance" in markets may be illusory, inventory levels, spare capacity, and future supply are less flexible than the price action suggests.
