Oil prices were on track Tuesday for their largest quarterly decline since the start of the COVID-19 pandemic in early 2020, as investors monitored the possibility of US-Iran talks in Doha while a fragile ceasefire continues to hold in the four-month conflict.

August Brent crude futures, which expire on Tuesday, rose 12 cents, or 0.16%, to $73.27 a barrel by 09:59 GMT.

Despite the gain, the contract remained on track for a third consecutive monthly decline, having fallen around 20% since the beginning of June.

The more actively traded September Brent contract gained 32 cents, or 0.43%, to $74.23 a barrel.

US West Texas Intermediate crude futures for August delivery rose 27 cents, or 0.38%, to $71.02 a barrel. However, the contract was also headed for a second straight monthly decline after dropping roughly 19% during June.

Both Brent and WTI are now trading close to the levels seen before the outbreak of the war.

Giovanni Staunovo, oil analyst at UBS, said: “I don’t think the market has fully removed the geopolitical risk premium, but vessels that had previously been stranded are now available again as shipping activity out of the Gulf increases, creating a temporary wave of additional supply.”

Uncertainty over Doha talks weighs on market outlook

US and Iranian negotiating teams had been expected to meet in Doha this week, but Iran said on Monday that no meeting had been scheduled after the exchange of missile strikes over the weekend tested the temporary ceasefire.

Iranian Deputy Foreign Minister Kazem Gharibabadi told state television on Monday that Iranian and Omani experts would begin talks in the coming days to redefine shipping routes through the Strait of Hormuz. He added that Tehran would seek to restrict vessels operating outside designated transit corridors.

However, Iranian Foreign Ministry spokesman Esmail Baghaei said there would be no negotiations “at any level” with the United States in the coming days.

The uncertainty surrounding the talks highlighted the fragility of the June 17 ceasefire agreement, which followed a conflict that disrupted global oil flows through the Strait of Hormuz and created a political challenge for US President Donald Trump ahead of November’s congressional elections.

Morgan Stanley cuts oil price forecasts

Morgan Stanley lowered its forecast for deferred Brent crude in 2027 by $5 a barrel.

The bank now expects Brent to average $75 a barrel in the first half of 2027 and $70 a barrel in the second half.

The downgrade was driven by expectations for rising commercial oil inventories across OECD countries.

Morgan Stanley now forecasts an implied surplus in the global oil market of 4.8 million barrels per day in 2027.

Separately, Iraq’s state oil marketer SOMO has offered substantial discounts on official selling prices to encourage long-term contract buyers to lift Basra crude from its Gulf export terminal in July, according to trading sources and a document reviewed by Reuters.

The US dollar rose against most major currencies on Tuesday and remained on track for monthly gains, supported by growing market concerns over further monetary tightening from the Federal Reserve.

The US Dollar Index, which measures the greenback against a basket of six major currencies, traded at 101.34, close to the 13-month high reached last week.

As a result, the dollar is on course to post a gain of around 2.5% in June, marking its strongest monthly performance since July 2025.

Iran developments

Investors are also closely monitoring developments in the Gulf region ahead of this week’s key US employment report.

The United States and Iran exchanged fresh attacks over the weekend before agreeing to halt hostilities and hold talks in Qatar on Tuesday. The developments have kept investors cautious about the durability of the ceasefire agreement while contributing to higher oil prices.

Federal Reserve

Rising inflation pressures, combined with the unexpectedly hawkish start to Federal Reserve Chair Kevin Warsh’s tenure, have reshaped market expectations for interest rates this year.

At the same time, the AI-driven rally in US equities continues to attract significant capital inflows into American markets.

Jane Foley, Head of FX Strategy at Rabobank, said: “This is very significant because since April of last year there has been a lot of discussion about a structural decline in the dollar. Even if you strongly believe in that view, you still have to acknowledge that there is room for a cyclical rally in the currency.”

She added: “That is exactly what we are seeing now. Part of the move reflects the fact that Federal Reserve rate-hike expectations were priced into markets later than those of the Bank of England and the European Central Bank, whose outlooks shifted earlier during the conflict. In addition, equity markets, particularly since the war began, have seen a clear asset-allocation bias toward the United States.”

Weekly data from the US market regulator showed that investors are holding the largest net bullish position on the US dollar against major currencies since 2019, worth approximately $36.4 billion, according to data compiled by the London Stock Exchange Group.

Investors are now awaiting the US monthly employment report later this week, which could provide a clearer picture of whether current market pricing for Federal Reserve rate hikes is justified.

Money markets currently fully price in one rate hike this year, while assigning roughly a 50% probability to a second increase before year-end.

Gold prices fell in European trading on Tuesday, extending losses for a second consecutive session and losing the $4,000-an-ounce level once again. The metal hit its lowest level in seven months and was on track for its largest monthly loss since 2008, amid renewed selling pressure, particularly from a stronger US dollar against a basket of global currencies.

Markets are awaiting a series of key US labor market reports starting today, which could provide crucial clues about the likelihood of a Federal Reserve interest rate hike this year.

The Price

• Gold prices today: Gold fell 1.85% to $3,942.55 an ounce, the lowest level since November 2025, from an opening level of $4,016.72, after touching an intraday high of $4,037.72.

• At Monday’s settlement, gold lost 1.75%, its first decline in three sessions, pressured by higher oil prices after the United States and Iran exchanged hostile strikes.

Monthly performance

• For June, which officially ends at today’s settlement, gold prices are down more than 13% and are on track for a fourth consecutive monthly loss, as well as their steepest monthly decline since October 2008.

• The sharp monthly loss reflects the continued fallout from the Iran war and concerns over liquidity shortages in global markets.

• The US dollar also climbed to a 13-month high against a basket of global currencies, as investors focused on buying the greenback as the preferred available investment.

US dollar

The US Dollar Index rose 0.35% on Tuesday, resuming gains after a three-session pause and moving back toward its highest levels in 13 months, reflecting renewed strength in the US currency against a basket of major and minor currencies.

The rise was supported by demand for the dollar as the preferred available investment, amid strong expectations that the Federal Reserve will raise interest rates at least once this year.

US interest rates

• According to CME Group’s FedWatch Tool, markets currently price a 68% probability that the Federal Reserve will leave interest rates unchanged at its July meeting, while the probability of a 25-basis-point rate hike stands at 32%.

• Markets also assign a 20% probability that rates will remain unchanged through December, while the probability of a 25-basis-point hike stands at 80%.

• Investors are closely monitoring upcoming US economic data, along with comments from Federal Reserve officials, to reassess those expectations.

• US job openings data for the end of May will be released later today, followed by ADP private employment data for June on Wednesday. Weekly jobless claims and the official June employment report are due on Thursday.

Gold outlook

Edward Meir, analyst at Marex, said: “We have high inflation, expectations of higher interest rates, and a strong dollar, and that is overshadowing all the other positive factors that would normally support gold prices.”

Meir added that if those pressures persist, gold could fall to a range between $3,500 and $4,400 in the second half of this year.

SPDR

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged on Monday, leaving total holdings at 1,005.08 metric tons, the lowest level since September 24, 2025.

The euro resumed its decline against a basket of major global currencies during European trading on Tuesday, falling against the US dollar after a three-day recovery streak and moving back toward its lowest level in 13 months. The single currency is now on track for a second consecutive monthly loss as investors continue to favor the US dollar as the preferred investment and reserve currency in the foreign exchange market.

Later today, Germany will release its June inflation report, which is expected to provide important clues about whether the European Central Bank could raise interest rates again before the end of the year.

The Price

• EUR/USD fell 0.25% to $1.1395 from an opening level of $1.1422, after touching an intraday high of $1.1426.

• The euro closed Monday up 0.35% against the US dollar, marking its third consecutive daily gain as the currency continued to recover from its 13-month low of $1.1325.

• In addition to bargain buying from lower levels, the euro also benefited from the agreement between the United States and Iran to halt hostilities and resume technical negotiations under the previously agreed 60-day framework.

Monthly performance

• For June, which officially concludes at today’s settlement, the euro is down 2.3% against the US dollar and remains on track for a second straight monthly loss.

• The decline reflects strong demand for the US dollar following the Federal Reserve’s hawkish policy meeting under its new chairman, Kevin Warsh.

• Demand for the dollar as a safe-haven alternative has also been supported by the fallout from the Iran conflict and the continued military tensions between the United States and Iran.

European interest rates

• Reports indicate that the European Central Bank is considering pausing further policy normalization in July if energy prices remain near current levels.

• Money markets continue to price roughly a 30% probability of a 25-basis-point ECB rate hike at the July meeting.

• Investors are now awaiting Germany’s June inflation data later today, which could significantly reshape expectations for European interest rates.

Euro outlook

According to Economies.com, if German inflation data comes in softer than market expectations, the likelihood of another ECB rate increase this year could decline further, potentially leading to additional losses for the euro against a basket of global currencies.