Commodities Wrap 7 July: Oil Jumps on Renewed Strait of Hormuz Tensions as Precious Metals Retreat
Commodities were split on Tuesday, with crude oil jumping sharply on a return of geopolitical tensions while precious metals pulled back, a near-reversal of the prior session. The levels below reflect CNBC’s active futures settlement values for the day, with metals settling in the early New York afternoon and energy contracts settling later in the session.
Energy led the day, driven by a return of geopolitical risk in the Gulf. Brent crude for September delivery jumped 3.07 percent to settle at US$74.20 a barrel and West Texas Intermediate for August rose 2.87 percent to US$70.52, lifting the US benchmark back above the US$70 mark for the first time in about a week. The move followed attacks on tankers in the Strait of Hormuz. According to CNBC and Bloomberg, a Qatari liquefied natural gas carrier and a Saudi-flagged crude tanker were damaged in the strait after reports that Iran’s Revolutionary Guard had fired missiles at commercial shipping in the waterway overnight, reviving concern about the security of a corridor that handles around a fifth of the world’s seaborne oil. The United States separately moved to revoke the general license that had authorised sales of Iranian oil, a US official told CNBC, saying the agreement with Iran was performance-based and that Iran’s actions in the strait would be met with consequences. The rebound more than offset an otherwise bearish supply backdrop, after the 5 July OPEC+ decision to raise August output by 188,000 barrels a day, and it left the Brent to WTI spread at about US$3.68 a barrel, our calculation. Natural gas edged up 0.59 percent to US$3.264 per million British thermal units.
Precious metals moved in the opposite direction. Gold eased 0.36 percent to settle at US$4,152.50 an ounce, giving back part of the previous session’s advance, while silver was the weakest of the complex, falling 1.48 percent to US$61.41 an ounce after leading the market higher a day earlier. The pullback lifted the gold to silver ratio to about 67.6, our calculation, up from around 66.7 the day before, as silver underperformed. Platinum and palladium bucked the softer tone in the precious complex, with platinum rising 1.25 percent to US$1,663.70 an ounce and palladium adding 0.90 percent to US$1,282.50, both supported by their industrial as much as their precious characteristics.
In base metals, copper eased 0.26 percent to US$6.216 a pound, a modest retreat that left the industrial metal little changed even as oil rallied, a divergence that points to the crude move being driven by the geopolitical supply-security shock rather than a broad shift in the industrial-demand outlook.
Why it matters: The day’s defining move was the return of a geopolitical risk premium to oil, which more than offset the bearish supply signal from rising OPEC+ output and reversed the previous session’s soft tone. For MENA the development cuts two ways. Firmer crude supports the export revenue of Gulf producers such as Saudi Arabia and Kuwait after a weak price stretch, easing some near-term budget pressure, but the location of the incident is the more serious point: the Strait of Hormuz is the single most important chokepoint for Gulf oil and gas exports, so any threat to shipping there raises insurance and freight costs and reintroduces a security risk premium that the region had only recently seen fade. The pullback in gold, meanwhile, trims at the margin the valuation gains regional central banks have booked on their bullion holdings.
Outlook: The near-term driver is now geopolitical: whether tensions around the Strait of Hormuz escalate or ease will matter more for crude in the immediate term than the OPEC+ supply path, though the group’s next meeting on 2 August remains a key date. For precious metals, the questions are the direction of the US dollar and real yields and whether Tuesday’s pullback is a pause in the rally or the start of a deeper consolidation, while copper will continue to take its cue from Chinese industrial demand.
Commodities, ranked highest to lowest
| Commodity | Settlement | Change |
|---|---|---|
| Brent Crude | US$74.20 | +3.07% |
| WTI Crude | US$70.52 | +2.87% |
| Platinum | US$1,663.70 | +1.25% |
| Palladium | US$1,282.50 | +0.90% |
| Natural Gas | US$3.264 | +0.59% |
| Copper | US$6.216 | -0.26% |
| Gold | US$4,152.50 | -0.36% |
| Silver | US$61.41 | -1.48% |
Sources: CNBC; Bloomberg; CME Group.
