Oil prices rose more than 1% on Thursday after a Reuters report stated that Iran’s Supreme Leader had issued instructions not to send Iran’s near-weapons-grade enriched uranium abroad.

The report, citing two senior Iranian sources, indicated that Iran is taking a tougher stance on one of the United States’ main demands in the peace negotiations. Ayatollah Mojtaba Khamenei’s decision could further complicate talks aimed at ending the war between the United States, Israel, and Iran.

Brent crude futures rose by $1.39, or 1.3%, to $106.41 per barrel, while US West Texas Intermediate crude gained $1.56, or 1.6%, to $99.82 per barrel.

Both benchmarks had fallen around 5.6% on Wednesday to their lowest levels in more than a week after US President Donald Trump said negotiations with Iran had entered their final stages.

In a diplomatic development, Pakistan intensified efforts to accelerate peace talks between the United States and Iran, while Tehran announced it was reviewing the latest US responses. Trump suggested he may grant Iran “a few more days” to provide the “right answers,” though he also reiterated that he is prepared to resume attacks if necessary.

Analysts at ING said in a note that markets have seen similar situations several times before, which often ended in disappointment, while forecasting Brent crude to average $104 per barrel during the current quarter.

Iran warned against any further attacks and announced new measures to strengthen its control over the vital Strait of Hormuz, which remains largely closed to shipping traffic.

Before the war began, the strait handled oil and liquefied natural gas shipments equivalent to around 20% of global energy consumption.

Economic data released on Thursday showed eurozone economic activity contracted at the fastest pace in more than two and a half years during May, as higher living costs driven by the war weakened demand for services and accelerated job cuts.

Growing drawdowns from oil inventories

Iran announced on Wednesday the creation of the “Persian Gulf Strait Authority,” confirming the enforcement of a “controlled maritime zone” inside the Strait of Hormuz.

Iran had effectively closed the strait in response to the US and Israeli attacks that triggered the war on February 28. Although most combat operations stopped following the April ceasefire, Iran continues restricting shipping movements, while the United States maintains a blockade on Iranian coastlines.

Supply disruptions from the Middle East have forced consuming nations to rapidly draw down commercial and strategic inventories, raising concerns over the depletion of global reserves.

The US Energy Information Administration said on Wednesday that the United States withdrew around 10 million barrels from its Strategic Petroleum Reserve last week, the largest drawdown ever recorded. The data also showed a larger-than-expected decline in US crude inventories.

Kim Fustier, Head of Global Oil and Gas Research at HSBC, said oil prices have “remained relatively resilient despite the scale of disruptions in the Middle East.”

She added that weaker Chinese demand, combined with increased oil exports from the Atlantic Basin led by the United States, along with rapid strategic inventory drawdowns, helped ease immediate supply shortage fears and reduce the severe imbalances that emerged at the beginning of the crisis.

The US dollar posted limited gains on Thursday but remained below its six-week high, as growing optimism that Washington is nearing an agreement with Tehran to end the war in the Middle East capped further advances in the US currency.

US President Donald Trump said on Wednesday that negotiations with Iran had entered their final stages, while also warning that additional strikes could be launched if Tehran refuses to agree to a deal.

The dollar, considered a safe-haven asset by investors, rose 0.1% against the Japanese yen to 159.06 yen after recording its first decline versus the Japanese currency in eight sessions on Wednesday.

The yen also received additional support after hawkish comments from Bank of Japan board member Junko Koeda, who said the central bank needs to continue raising interest rates as underlying inflation stabilizes near the 2% target.

Meanwhile, the euro fell 0.2% to $1.16005 after dropping on Wednesday to its weakest level since April 7 at $1.1583 before rebounding.

Pressure on the European currency intensified after data showed French economic activity contracted in May at the fastest pace in five and a half years.

“The French PMI data was extremely weak, but the European Central Bank still appears determined to raise rates,” said Kenneth Broux, Head of FX and Rates Research at Société Générale, explaining the euro’s weakness.

Traders are also awaiting the release of the eurozone composite PMI data later today.

The British pound also slipped 0.1% to $1.3421.

The US Dollar Index, which measures the greenback against a basket of major currencies, rose 0.2% to 99.295 points, though it remained below Wednesday’s peak of 99.472 points, the strongest level since April 7.

Joseph Capurso, Head of International and Sustainable Economics at Commonwealth Bank of Australia, said “safe-haven flows reversed following positive news regarding the war with Iran.”

However, he added that the United States could still resort to military escalation to strengthen its negotiating position, despite domestic political incentives pushing toward peace.

Investors remain focused on the inflationary impact of higher energy prices as the Strait of Hormuz continues to face partial shipping disruptions.

Currency analysts at Commerzbank said some central banks may view the current inflation shock as “temporary” if the strait reopens in the coming days, but warned that such an assessment would be flawed because it overlooks the decline in purchasing power.

They added that currencies could benefit in countries where central banks are slower to label rising prices as temporary, while the possibility of tighter monetary policy remains in place.

Minutes from the Federal Reserve’s April meeting, released Wednesday, also showed growing concern among policymakers regarding inflation, with a larger number of officials becoming open to the possibility that further interest rate hikes may be necessary.

In other markets, the Australian dollar declined after an unexpected rise in unemployment to the highest level since 2021, reducing expectations for additional rate hikes from the Reserve Bank of Australia.

The Australian dollar fell 0.55% to $0.71105 after traders scaled back expectations for further monetary tightening this year.

Ryan Wells, economist at Westpac, said expectations for rates to remain unchanged at the June meeting are now “high conviction,” though he noted that inflation remains the central bank’s biggest challenge.

Gold prices rose in European trading on Thursday, remaining in positive territory for a second consecutive day as the metal continued recovering from its lowest level in nearly two months, supported by a weaker US dollar against a basket of currencies amid growing optimism over a possible peace agreement between the United States and Iran.

Expectations for at least one US interest rate hike this year have also increased, especially after the release of the minutes from the latest Federal Reserve policy meeting, which showed policymakers remain open to raising rates further.

Price overview

• Gold prices today: Gold rose 0.65% to $4,570.93 per ounce, from an opening level of $4,542.23, after touching an intraday low of $4,512.06.

• At Wednesday’s settlement, gold gained 1.4%, after earlier falling to a two-month low of $4,453.60 per ounce.

The US dollar

The US Dollar Index fell 0.1% on Thursday, extending losses for a second consecutive session and moving further away from its highest levels in a month and a half, reflecting continued weakness in the US currency against a basket of global currencies.

Beyond profit-taking activity, the dollar weakened as optimism increased over Washington nearing an agreement with Tehran to end the war in the Middle East.

Developments in the US-Iran negotiations

• Trump: The United States is in the final stages of negotiations with Iran.

• Trump said he is prepared to wait a few days for the “right answer” regarding a peace agreement with Iran.

• Iran’s Foreign Ministry officially announced that it is currently reviewing the latest response and proposals received from Washington through the Pakistani mediator.

• Sources: A new round of US-Iran peace negotiations will be held in Islamabad after the Hajj season.

• Pakistan’s army chief may visit Iran today, Thursday, to announce the final draft of the agreement.

US interest rates

• Minutes from the Federal Reserve’s April meeting showed that most policymakers believe “some additional tightening in monetary policy may become appropriate” if inflation remains above the central bank’s 2% target.

• Kevin Warsh will be sworn in as Chairman of the Federal Reserve on Friday.

• According to CME’s FedWatch Tool, markets are currently pricing in a 40% probability that the Federal Reserve will raise interest rates in December, compared to just above 16% at the beginning of May.

• Markets continue to price a 99% probability that interest rates will remain unchanged at the June meeting, while the probability of a 25-basis-point rate cut stands at only 1%.

• To reassess these expectations, investors are closely monitoring upcoming US economic data as well as comments from Federal Reserve officials.

Gold outlook

Kelvin Wong, Senior Market Analyst for Asia-Pacific at OANDA, said sentiment improved “after Trump’s remarks indicating that the United States and Iran are approaching the final stages of a peace agreement.”

Wong added: “The broader trend in the US 10-year Treasury yield has remained moderately bullish since early March. Therefore, gold bulls may not be overly enthusiastic about pushing prices significantly higher at this stage.”

SPDR Gold Trust

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained essentially unchanged on Wednesday, with total holdings steady at 1,036.85 metric tons, the lowest level in a week.

The euro rose in European trading on Thursday against a basket of global currencies, extending its recovery for a second straight session from a six-week low against the US dollar, supported by continued bargain buying and easing demand for the US currency as a safe haven amid optimism over a potential peace agreement between the United States and Iran.

Investors are now awaiting a series of economic releases later today covering the main sectors of the European economy for May, as markets continue to reprice rising expectations that the European Central Bank could raise interest rates at its June meeting.

Price Overview

• Euro exchange rate today: The euro rose by around 0.1% against the US dollar to $1.1635, from the session opening level at $1.1624, after touching an intraday low of $1.1616.

• The euro ended Wednesday’s session up around 0.2% against the dollar after earlier falling to a six-week low of $1.1583.

• In addition to bargain buying at lower levels, the euro gained alongside improving risk appetite in global markets following positive remarks regarding US-Iran negotiations.

US dollar

The US Dollar Index fell by around 0.1% on Thursday, extending losses for a second consecutive session and moving further away from one-and-a-half-month highs, reflecting continued weakness in the US currency against a basket of major and minor currencies.

Beyond profit-taking activity, the dollar weakened as hopes increased that Washington is nearing an agreement with Tehran to end the war in the Middle East.

Iran war developments

• Trump: The United States is in the final stages of negotiations with Iran.

• Trump said he is willing to wait a few more days for the “right answer” regarding a peace agreement with Iran.

• Iran’s Foreign Ministry officially announced that it is currently reviewing the latest responses and proposals received from Washington through the Pakistani mediator.

• Sources: A new round of peace talks between the United States and Iran will be held in Islamabad after the Hajj season.

• Pakistan’s army chief may visit Iran on Thursday to announce the final wording of the agreement.

European interest rates

• Sources: The European Central Bank is highly likely to raise interest rates in June due to inflation expectations moving toward an undesirable scenario.

• Money markets are currently pricing in more than a 70% probability of a 25 basis point ECB rate hike at the June meeting.

• Investors are awaiting a series of economic reports later today on the key sectors of the European economy during May in order to reassess those expectations.