Oil drops below $80 and gold rises to seven-week high on hopes of Hormuz reopening

Oil prices plunged beneath $80 a barrel on Thursday, buoyed by optimism that the Strait of Hormuz could once again serve as a crucial shipping lane. Brent crude, the benchmark for two-thirds of global oil trade, fell 0.45% to $79.07 a barrel. West Texas Intermediate, tracking US crude, saw a 0.66% drop to $74.72 a barrel. Iranian Foreign Ministry spokesman Esmaeil Baghaei confirmed on Wednesday that Iran and Oman are nearing completion of a deal outlining a safe passage through Hormuz, following two months of negotiations.

Meanwhile, gold surged to a seven-week high, reflecting growing confidence in the precious metal amidst market turbulence spurred by the Iran conflict. Spot gold climbed 0.5% to $4,265.22 per ounce, its highest level since June 18. The rally has been driven by factors including a softening US labor market, a weaker US dollar, declining US Treasury yields, and shifting expectations about Federal Reserve monetary policy, according to Rania Gule, senior market analyst at XS.com for the Mena region.

Gold's ascent has outpaced its 19% decline since the start of the Iran war on February 28, driven by concerns over potential energy-driven inflation and subsequent interest rate hikes. Analysts now see the current gold rally as more than a technical rebound; instead, it is being fueled by fundamental factors such as a potential shift in the Federal Reserve's monetary policy toward a less restrictive stance.