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Crude oil prices could remain capped near current deflated levels and inflation pressure may stay in check if the US -Iran truce holds and the Strait of Hormuz reopens without disruption, noted Manav Modi, Commodities Analyst at Motilal Oswal Financial Services.
Crude oil prices fell for the second consecutive session on Wednesday, slipping below the key USD 80 per barrel mark after the announcement of a preliminary US-Iran truce agreement earlier this week. Benchmark Brent crude was trading at around USD 79 per barrel at 11:58 IST and touched an intraday low of USD 78.13 per barrel. The decline marks the first time since March that Brent crude has traded below USD 80 per barrel. Market sentiment improved following news of a preliminary US-Iran peace framework, which is expected to be formally signed in Switzerland on Friday. The proposed agreement aims to end months of conflict, reopen the Strait of Hormuz, and lift the US naval blockade on Iran. According to Manav Modi, Commodities Analyst at Motilal Oswal Financial Services, if the truce holds and the Strait of Hormuz reopens without disruption, crude oil prices could remain capped near current levels, helping keep inflationary pressures under control. "Oil prices fell below USD 80 for the first time since March, easing concerns over energy-driven inflation," Modi said. He added that easing inflation concerns have also influenced expectations around monetary policy. "While softer inflation outlook has reduced market expectations for Fed rate hikes, investors remain cautious ahead of the Fed's policy decision scheduled later today, the first under new Chair Kevin Warsh," Modi said. The US Federal Reserve is widely expected to keep interest rates unchanged, though investors will closely watch updated economic projections and policy guidance for indications on the future rate path. Meanwhile, the Bank of Japan raised its policy rate to 1 per cent, its highest level in 31 years, adding another factor to the global monetary policy landscape. Commenting on precious metals, Modi said, "Gold prices edged higher, extending gains from previous session as easing inflation concerns and a steady US dollar continued to support bullion following the announcement of a preliminary U.S.-Iran peace framework." He further said that market participants are awaiting further details on the US-Iran agreement and the outcome of the Federal Reserve meeting. Market participants now await "greater clarity on US-Iran agreement, particularly regarding Iran's nuclear commitments and the timeline for implementation, while the Fed meeting remains the key near-term driver for gold and silver prices," Modi said. Analysts believe that while the US-Iran truce has reduced concerns over oil supply disruptions and inflation, any setback in negotiations or a more hawkish-than-expected stance from the Federal Reserve could trigger renewed volatility across commodity markets. (ANI)
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