Oil prices declined on Tuesday, retreating from the previous session's gains as expectations grew that peace talks between the United States and Iran might be held this week, potentially paving the way for the return of more supplies from the Middle East, one of the world's most critical oil production hubs.

Brent crude contracts fell by 69 cents to $94.79 per barrel, while U.S. West Texas Intermediate (WTI) for May delivery dropped by $1.12, or 1.3%, to $88.49. The more active June contract also declined slightly to $90.27.

Prices had jumped sharply on Monday, with Brent rising 5.6% and WTI surging nearly 6.9% after Iran re-closed the Strait of Hormuz and the United States seized an Iranian cargo ship as part of its naval blockade.

Investors are currently focused on whether the potential talks this week will lead to an extension of the existing ceasefire or a final agreement, despite ongoing fears of disruptions to oil flows.

Tamas Varga, an analyst at PVM Oil Associates, stated that the market is leaning toward the belief that an extension between Washington and Tehran might be reached before the truce expires, adding that upcoming talks between Israel and Lebanon could also support this trend.

However, uncertainty remains as an Iranian official stated that no decision has yet been made regarding participation in the talks, while Iranian Foreign Minister Abbas Araghchi emphasized that "continued violations of the ceasefire" by the United States are hindering the negotiation process.

Continued concerns over global supplies

Shipping traffic through the Strait of Hormuz, where approximately one-fifth of global oil supplies typically pass, remains limited, heightening supply concerns. In this context, the EU Energy Commissioner warned that summer will be difficult for Europe due to fuel shortages, even in the best-case scenarios.

Citi warned that if disruptions continue for an additional month, losses could reach approximately 1.3 billion barrels, with the potential for prices to rise toward $110 per barrel during the second quarter.

Additional factors weighing on the market

At the same time, firefighters are still battling a blaze at the Russian port of Tuapse on the Black Sea, more than 24 hours after a Ukrainian drone attack. The port is a major hub for oil product exports and houses a primary Rosneft refinery.

In another development, Russia is expected to halt Kazakh oil exports to Germany via the "Druzhba" pipeline starting May 1, which could increase pressure on European supplies.

The market is also awaiting the weekly inventory report from the U.S. Energy Information Administration (EIA). Latest data showed a decrease in U.S. crude oil, gasoline, and distillate inventories due to lower imports and higher exports.

Analysts believe that the continued rise in U.S. oil and product exports may reflect tightening supply in Asia and Europe, potentially providing new support for prices in the coming period.

The U.S. dollar rose slightly on Tuesday, following a decline in the previous session, amid a state of anticipation and caution among investors due to uncertainty surrounding Middle East peace talks.

The United States expressed confidence in the possibility of moving forward with peace talks with Iran in Pakistan; however, significant obstacles remain as the two-week truce nears its end. President Donald Trump announced this truce on April 7, and it is scheduled to expire at 8:00 PM ET on Wednesday.

The dollar index, which measures the performance of the American currency against a basket of major currencies such as the euro and the yen, recorded a 0.22% increase to reach 98.28 points, after a 0.2% decline the previous day.

The dollar typically benefits from safe-haven demand during periods of geopolitical tension, while high oil prices negatively impact currencies like the euro and the yen, given Europe and Japan's heavy reliance on energy imports.

In this context, Paul Mackel, head of global FX research at HSBC, stated that the "binary" nature between escalation and de-escalation in the geopolitical landscape is placing pressure on currency markets, noting that continued talks could weaken the dollar, while their failure would support it.

Euro and yen movements under energy and monetary policy pressure

The euro declined by approximately 0.2% to $1.1760, affected by energy price movements, particularly natural gas, as the European currency has recently begun following these price trends closely.

Despite this, traders still expect about two interest rate hikes by the European Central Bank by the end of the year, even though Bank President Christine Lagarde emphasized the need for more data before making decisive decisions, with expectations of keeping rates unchanged this month.

As for the Japanese yen, it fell 0.20% to 159.20 per dollar, remaining close to the critical 160 level, which traders consider a threshold that could prompt Japanese authorities to intervene in the foreign exchange market.

Forecasts suggest that the Bank of Japan may delay raising interest rates at its next meeting, amid continued ambiguity regarding a near end to the war in the Middle East and its impact on the economy.

Anticipation of Fed policies and U.S. economic data

Simultaneously, investors are awaiting the confirmation hearing for Kevin Warsh as Federal Reserve Chair, where eyes will be focused on his views regarding monetary policy and central bank independence.

Analysts believe that Warsh's statements may not clearly lean toward monetary easing, especially given the rise in short-term inflation expectations, which could have a negative impact on the dollar if he suggests a cut in real interest rates.

Investors are also closely monitoring U.S. retail sales data for March, with expectations of a strong 1.4% increase, which may provide additional signals regarding the strength of the U.S. economy.

Gold prices declined in the European market on Tuesday, extending losses for the second consecutive day and moving further away from a four-week high. This comes amid ongoing correction and profit-taking, coupled with pressure from a rising U.S. dollar in the foreign exchange market.

The continued closure of the Strait of Hormuz by Iran and the ongoing U.S. blockade of Iranian ports have stalled talks between the two nations. This adds difficulty to convening the second round of peace negotiations in Pakistan before the ceasefire agreement expires tomorrow, Wednesday.

Price Overview

- Gold Prices Today: Gold metal prices fell by approximately 1.0% to ($4,772.91), from an opening level of ($4,820.41), and recorded a high of ($4,833.35).

- Upon price settlement on Friday, gold prices lost about 0.25% due to correction and profit-taking from a four-week high of $4,890.78 per ounce.

The U.S. Dollar

The dollar index rose 0.25% on Tuesday, resuming the gains that had temporarily paused in the previous session, reflecting the renewed ascent of the American currency against a basket of major and minor currencies.

As is well known, the rise in the U.S. dollar makes dollar-priced gold bullion less attractive to buyers holding other currencies.

This rise is driven by renewed safe-haven buying of the U.S. dollar amid the state of deadlock surrounding the second round of peace negotiations scheduled to be held in Islamabad.

Iranian War Updates

- The U.S. delegation, led by Vice President JD Vance, has not yet arrived in Pakistan to participate in the new round of peace negotiations.

- The Iranian Foreign Ministry announced it has "no plans" at this moment to participate in this round.

- International and regional parties are pressuring Tehran to join the peace negotiations before the two-week ceasefire expires tomorrow, Wednesday.

Global Oil Prices

Global oil prices rose by approximately 1% on Tuesday, extending gains for a second consecutive day amid renewed fears of supply disruptions from the Arabian Gulf region, particularly following the re-closing of the Strait of Hormuz.

The rise in global oil prices renews concerns over accelerating inflation, which could prompt global central banks to raise interest rates in the near term—a sharp pivot from pre-war expectations of rate cuts or prolonged pauses.

U.S. Interest Rates

- Kevin Warsh, Donald Trump's nominee for Federal Reserve Chair, will testify before lawmakers at a Senate hearing on Tuesday, stating he is "committed to ensuring the full independence of monetary policy."

- According to the CME Group's FedWatch tool: the probability of keeping U.S. interest rates unchanged at the April meeting is stable at 99%, while the probability of a 25-basis-point hike stands at 1%.

- Investors are closely following the release of more U.S. economic data to re-price these probabilities.

Gold Performance Expectations

Kyle Rodda, an analyst at Capital.com, said: The next news is whether the talks will be held in Islamabad, and if they are, whether the ceasefire will be extended or, better yet, a peace agreement reached.

Rodda added: If these things happen, gold is likely to receive strong support given the drop in oil prices; if they do not, we could see some volatility return to the market.

SPDR Fund

Gold holdings at the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, decreased on Monday by 0.86 metric tons, bringing the total down to 1,059.76 metric tons from 1,060.62 metric tons (which was the highest level since March 19).

The British pound declined in the European market on Tuesday against a basket of global currencies, resuming its losses against the U.S. dollar and moving away from two-month highs due to correction and profit-taking. This comes as the American currency rises amid the uncertainty surrounding the second round of peace negotiations between the United States and Iran scheduled in Pakistan.

To re-price the existing probabilities regarding the path of British interest rates throughout this year, investors are awaiting the release of significant UK labor market data later today.

Price Overview

- British Pound Exchange Rate Today: The pound fell against the dollar by 0.15% to ($1.3515), from an opening price of ($1.3534), and recorded a high of ($1.3539).

- On Monday, the pound achieved a 0.1% increase against the dollar, resuming gains that had paused for three days during correction and profit-taking from a two-month high of $1.3600.

The U.S. Dollar

The dollar index rose on Tuesday by 0.1%, resuming the gains that had temporarily paused in the previous session, reflecting the renewed ascent of the American currency against a basket of major and minor currencies.

This rise stems from renewed safe-haven buying of the U.S. dollar given the state of uncertainty surrounding the second round of peace negotiations between the United States and Iran, set to be held in the Pakistani capital, Islamabad.

Iranian War Updates

- U.S. President Donald Trump announced the dispatch of a high-level delegation led by Vice President JD Vance to Pakistan to participate in the new round of peace negotiations.

- The Iranian Foreign Ministry announced that it has "no plans" at this moment to participate in this round.

- Several international and regional parties are pressuring Tehran to participate in the peace negotiations before the two-week ceasefire agreement expires tomorrow, Wednesday.

British Interest Rates

- The Bank of England warned following its last meeting that inflation will rise in the near term as a result of higher energy prices caused by the Iranian war.

- The market pricing of the probability of the Bank of England raising British interest rates at the April meeting is stable around 20%.

UK Labor Market

To re-price the above probabilities, investors are awaiting significant labor market data from the United Kingdom later today, including March unemployment benefit claims, the unemployment rate, and average earnings for February.

British Pound Performance Expectations

If the UK labor market data comes in less aggressive than expected, the probability of a British interest rate hike in April will decline, leading to further downward pressure on the pound.