Oil prices fell by more than 1% on Monday as fears of a Middle East conflict eased after the United States and Iran pledged to continue indirect talks over Tehran’s nuclear program, calming concerns about possible supply disruptions.

Brent crude futures declined by $0.84, or 1.2%, to $67.21 per barrel as of 07:47 GMT, while US West Texas Intermediate crude fell $0.82, or 1.3%, to $62.73.

Tony Sycamore, market analyst at IG, said that with more talks ahead, immediate concerns about supply disruptions in the Middle East have largely faded.

Iran and the United States agreed to continue negotiations after what both sides described as positive discussions held on Friday in Oman, easing worries that a breakdown in talks could push the region toward military confrontation, especially as the US has deployed additional forces to the area.

Roughly one-fifth of global oil consumption passes through the Strait of Hormuz between Oman and Iran.

Both benchmark crudes dropped more than 2% last week as tensions cooled, marking their first weekly decline in seven weeks.

However, Iran’s foreign minister said the country would target US bases in the Middle East if attacked by American forces, underscoring that the risk of conflict has not fully disappeared.

Priyanka Sachdeva, senior market analyst at Phillip Nova, said volatility remains elevated amid conflicting rhetoric, and any negative headlines could quickly rebuild risk premiums in oil prices this week.

Investors are also weighing Western efforts to curb Russia’s oil revenue that supports its war in Ukraine. The European Commission on Friday proposed a broad ban on services that support Russia’s seaborne crude exports.

Sources in refining and trading said Indian refiners — previously the largest buyers of Russian seaborne oil — are avoiding purchases for April delivery and may stay away longer, which could help New Delhi secure a trade agreement with Washington.

Sachdeva added that oil markets will remain sensitive to how far this shift away from Russian crude expands, whether India’s reduced buying continues beyond April, and how quickly alternative supplies reach the market.

The British pound fell against the euro and weakened versus the dollar on Monday, as traders reacted to the crisis facing UK Prime Minister Sir Keir Starmer, alongside the impact of expectations for future interest rate cuts on the currency.

Morgan McSweeney, Starmer’s chief of staff, resigned on Sunday, saying he took responsibility for advising the prime minister to appoint Peter Mandelson as ambassador to the United States despite his known links to Jeffrey Epstein.

Even so, Starmer remains under growing pressure as the fallout from the Epstein case continues and difficult local elections approach.

The euro rose 0.49% in the latest trading against the pound to 87.22 pence, close to a two-week high, although the European currency remains broadly stable against sterling since the start of the year.

Against the dollar, the pound slipped slightly to $1.3607 after falling about 0.2% earlier in the session.

Politics in focus for UK assets

UK government bonds slightly underperformed their European peers on Monday, with markets focused on Starmer’s position, though moves remained limited.

Many bond investors fear that a new Labour prime minister could shift toward more left-leaning policies and higher spending, while currency markets typically dislike political instability.

The government now faces the possibility of publishing near-complete private correspondence between officials regarding Mandelson’s appointment, in what could prove politically embarrassing.

A by-election in Manchester later this month, along with local elections in May, could also deliver another blow to Starmer’s leadership.

Chris Turner, head of global markets at ING, said pressure is expected to continue on both sterling and UK government bonds amid market speculation about possible changes in the occupants of 10 and 11 Downing Street, referring to the prime minister and finance minister. He added that, alongside the dovish tone seen at last week’s Bank of England meeting, the pound is under pressure.

Diverging rate-cut bets

Sterling was also affected by the Bank of England’s decision last week to keep interest rates unchanged, with a closer-than-expected vote split that pushed traders to increase bets on further cuts this year.

By contrast, the European Central Bank is expected to keep rates steady for the foreseeable future, reducing the pound’s appeal versus the euro amid expectations of relatively lower yields.

Neil Jones, managing director of FX sales and trading at TJM Europe, said the pound appears set to continue its broader weak trend as political uncertainty rises.

Three-month risk reversals, which measure the cost difference between euro call options versus pound calls, rose to 67 basis points, the highest level since late November, up from 22 basis points on Thursday. A higher reading signals stronger bullish positioning in the euro versus the pound.

The euro also rose about 0.4% against the dollar on Monday. Some analysts noted that a Bloomberg report saying China advised banks to limit their holdings of US Treasuries added pressure on the dollar.

Silver prices rose by about 6% in the European market on Monday, extending their recovery for a second consecutive session from a seven-week low, and trading once again above the $80 per ounce level, supported by active buying from lower levels.

The rally is also supported by the current decline in the US dollar in the foreign exchange market, ahead of a series of important US economic releases that will provide strong evidence about the Federal Reserve’s interest rate path.

Price Overview

Silver prices today rose by 6.0% to $82.48 per ounce, from an opening level of $77.87, with a session low recorded at $77.87.

At Friday’s settlement, silver gained 9.75%, marking its third advance in the past four sessions, after hitting a seven-week low earlier in trading at $64.08 per ounce.

Over the past week, silver fell by 8.65%, posting its second consecutive weekly loss, amid ongoing correction and profit-taking from record levels, and concerns related to higher margin requirements on gold and silver futures contracts.

US Dollar

The US Dollar Index fell 0.4% on Monday, extending losses for a second straight session and reflecting continued weakness in the US currency against a basket of major and secondary currencies.

The decline is driven by negative pressures led by tighter scrutiny of capital spending by major technology companies, rising concerns about AI-related disruption in the software sector, and liquidity and margin pressures linked to gold and silver markets.

US Interest Rates

San Francisco Federal Reserve President Mary Daly said on Friday that one or two additional rate cuts may be needed to address weakness in the labor market.

According to the CME FedWatch tool, the probability of keeping US interest rates unchanged at the March meeting stands at 85%, while the probability of a 25 basis point rate cut is priced at 15%.

To reprice these expectations, investors are closely monitoring upcoming US economic data, along with further comments from Federal Reserve officials.

Starting Tuesday, several key US data releases are due, including retail sales, the delayed jobs report on Wednesday, weekly jobless claims on Thursday, and core inflation data for January on Friday.

Gold prices rose more than 1.5% in the European market on Monday, extending gains for a second consecutive session and trading back above the psychological $5,000 per ounce level, supported by the current decline in the US dollar against a basket of major global currencies.

Following less aggressive comments from several Federal Reserve officials, traders are watching closely this week for a series of key US economic releases that will provide strong evidence about the path of US interest rates over the course of this year.

Price Overview

Gold prices today rose by 1.65% to $5,047.18 per ounce, from an opening level of $4,964.30, with a session low recorded at $4,964.30.

At Friday’s settlement, gold gained 3.7%, marking its third advance in the past four sessions, driven by safe-haven buying amid geopolitical tensions between the United States and Iran.

Over the past week, gold posted a 1.45% gain, recording its fourth weekly rise in the last five weeks.

US Dollar

The US Dollar Index fell 0.4% on Monday, extending losses for a second straight session and reflecting continued weakness in the US currency against a basket of major and secondary currencies.

A weaker dollar makes dollar-denominated gold bullion more attractive to holders of other currencies, supporting demand.

The dollar is facing negative pressure from tighter scrutiny of capital spending by major technology companies, rising concerns about AI-driven disruption in the software sector, and liquidity and margin-related pressures linked to gold and silver markets.

US Interest Rates

San Francisco Federal Reserve President Mary Daly said on Friday that one or two additional rate cuts may be needed to address weakness in the labor market.

According to the CME FedWatch tool, the probability of leaving US interest rates unchanged at the March meeting stands at 85%, while the probability of a 25 basis point rate cut is priced at 15%.

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

Starting Tuesday, several key US data releases are due, including retail sales, the delayed jobs report on Wednesday, weekly jobless claims on Thursday, and core inflation data for January on Friday.

Gold Outlook

Kelvin Wong, Senior Market Analyst for Asia Pacific at OANDA, said the very short-term relationship during the session between the dollar and silver, as well as gold, is helping push precious metals higher.

Tim Waterer, Chief Market Analyst at KCM Trade, said bargain hunting is also driving gold back above the $5,000 level.

He added that any weakness in employment data could support gold’s recovery, noting that no Federal Reserve rate cut is expected before mid-year unless labor market data shows a sharp deterioration.

SPDR Fund

Holdings of SPDR Gold Trust, the world’s largest gold-backed ETF, declined by 1.72 metric tons on Friday, marking the fourth consecutive daily decrease, bringing total holdings down to 1,076.23 metric tons, the lowest level since January 15.