Gold price surges, energy shares fall after US-Iran peace agreement

Gold prices rose to a near one-week high on Monday as a tentative peace agreement between the US and Iran pushed oil prices lower and eased concerns about a US Federal Reserve rate hike. Spot gold rose 2.7% to $4,334.48 per ounce, as of 0857 GMT, hitting its highest level since June 9. US gold futures for August delivery climbed 2.8% to $4,355.30.

Additionally, US energy shares fell in premarket trading as crude prices tumbled after Washington and Tehran reached an initial deal that could end the months-long conflict and reopen the vital Strait of Hormuz. The US and Iran will sign a memorandum of understanding in Switzerland on Friday, Pakistan's prime minister said, after his country helped mediate talks between the two sides.

Brent crude futures fell 4.8% to $83.10 per barrel by 1047 GMT, while US West Texas Intermediate crude was down 5.2% at $80.46 per barrel. Shares of Exxon Mobil and Chevron fell 2.6% and 2.5%, respectively. Diamondback Energy, Devon Energy, ConocoPhillips and Occidental Petroleum were down between 2.6% and 3.2%. Refiners Valero Energy, Marathon Petroleum and Phillips 66 also declined between 2.5% and 3%. In Europe, BP shares fell 3.4%, while Shell shares dropped 4.3%.

US and Iranian officials said they had reached an agreement to end their war and reopen the Strait of Hormuz, a preliminary pact that sent oil prices falling but leaves the fate of Tehran's nuclear program to further negotiations. The pact will be officially signed on Friday in Switzerland, Pakistani Prime Minister Shehbaz Sharif said in a post on X.

"Market participants are pricing out rate hikes due to lower oil prices, which is lifting the yellow metal," said UBS analyst Giovanni Staunovo. "Near-term, I would expect some consolidation until we get some clarity from the Fed later this week."

The US dollar fell to a 10-day low, making greenback-priced bullion more affordable for holders of other currencies, while oil prices slipped to an over-three-month low. Markets have scaled back expectations for a US interest rate hike in December to 53% after the peace deal, down from 69% last week, according to the CME FedWatch tool. Investors are now looking ahead to the Federal Reserve's policy meeting this week, its first under new Fed Chair Kevin Warsh, with rates widely expected to remain unchanged.

Energy stocks had rallied since the conflict broke out as concerns mounted that it could disrupt shipments through the Strait of Hormuz. Analysts cautioned that physical oil markets could take longer to recover than financial markets. "Even if ships now have safe passage, tankers are in the wrong place, oil production/refining facilities need to get up to full capacity, and questions over the cost and availability of insurance for ships traversing the Strait will remain," said Capital Economics group chief analyst Neil Shearing.

Elsewhere, Singapore will establish an over-the-counter gold clearing system and introduce central bank gold-vaulting services, the deputy prime minister said, as the city-state looks to establish itself as a gold trading hub.

Among other metals, spot silver rose 3.7% to $70.51 per ounce, platinum gained 3.4% to $1,776.83, and palladium climbed 4.4% to $1,339.76.
(With Reuters inputs.)