Oil prices fell on Tuesday, surrendering most of the previous session’s gains after Iran and Israel announced a halt to their mutual attacks following a call from US President Donald Trump, although both sides warned that military operations could resume.

Brent crude futures declined by $1.55, or 1.6%, to $92.70 per barrel by 10:12 GMT, while US West Texas Intermediate crude fell by $1.93, or 2.1%, to $89.37 per barrel.

Tamas Varga, an analyst at PVM Oil Associates, said the market has “been through this scenario before,” referring to repeated hopes that the three-month-long conflict in the Middle East could be nearing an end, only for tensions to flare up again.

He added that prices weakened in the absence of new bullish catalysts after Iran and Israel confirmed a suspension of attacks, following a 5% rally on Monday driven by fresh Israeli strikes on Iran and attacks in Lebanon over the weekend.

Inventory concerns and weaker Chinese demand weigh on the market

Varga noted that global oil inventories continue to decline, warning that if stockpiles fall to critically low levels, Brent crude could climb back above $100 per barrel as competition for available supplies intensifies.

Despite the pause in attacks, Tehran continues to disrupt much of the shipping traffic through the Strait of Hormuz, which before the conflict handled roughly one-fifth of global crude oil and liquefied natural gas trade, while Washington maintains a blockade on Iranian ports.

Weak Chinese crude oil imports also added pressure to prices. Imports fell 29% last month to the lowest level in eight years. In April, imports dropped to 9.3 million barrels per day, compared with an average of 11 million barrels per day before the outbreak of the US-Israeli conflict with Iran, as Chinese refiners relied on drawing down inventories to offset supply shortages.

In a separate development, the US military announced on Monday that it intercepted an empty oil tanker in the Gulf of Oman after it attempted to sail toward an Iranian port in violation of sanctions and blockade measures imposed on Iran.

The US dollar edged lower on Tuesday as investors weighed the prospects of an agreement that could reopen the Strait of Hormuz against expectations for higher US interest rates following last week’s strong employment data.

The US economy is generally viewed as less vulnerable to energy shocks than many other major economies. As a result, investors flocked to the dollar as a safe-haven asset during the recent escalation in the Middle East, while both the euro and the Japanese yen came under selling pressure.

Conversely, investors tend to sell the dollar against the euro and the yen when developments in the Middle East point to a potential peace agreement that could ease pressure on oil prices.

US Treasury yields surged on Friday after data showed that American employers added significantly more jobs than expected in May, reinforcing bets that the Federal Reserve could raise interest rates later this year.

Thierry Wizman, Global FX and Rates Strategist at Macquarie Group, said that following Friday’s data, markets may have shifted from a growth-driven narrative to one focused on rising real yields.

Iran and Israel announced on Monday that they would halt mutual attacks following a call from US President Donald Trump, although Tehran warned that it would resume operations if Israel continued targeting Hezbollah in Lebanon.

Wizman added that the current state of “no agreement and no war” between the United States and Iran may not be sustainable indefinitely.

He noted that the US administration could eventually seek to reopen the Strait of Hormuz by force, particularly if global oil inventories fall to critically low levels.

The US Dollar Index, which measures the currency against a basket of major peers, slipped 0.12% to 99.88 after reaching its highest level since April 6 on Monday.

Meanwhile, the euro gained 0.1% to $1.1545 as direct military strikes in the Middle East subsided and investor attention shifted toward the upcoming European Central Bank meeting, where markets expect a 25-basis-point rate hike.

Investors are also awaiting US inflation data due on Wednesday for additional clues about the Federal Reserve’s next policy move. Interest rate futures currently imply a 70% probability of a rate hike by December, according to the CME FedWatch Tool.

Analysts noted that resilient economic growth and persistent inflation pressures could continue to support expectations for higher US interest rates, even if Washington and Tehran ultimately reach an agreement.

The Japanese yen weakened to ¥160.22 per dollar, remaining close to the ¥160 level that markets view as a potential trigger for official intervention by Japanese authorities.

At the same time, markets have almost fully priced in a Bank of Japan rate hike at its June 16 meeting, although analysts believe that such a move alone may not be enough to reverse the yen’s weakness in a meaningful way.

Lee Hardman, Senior Currency Economist at MUFG, said that a decision by the Bank of Japan not to raise rates again would likely generate a more negative reaction in the yen and reinforce concerns that the central bank is falling behind the curve in addressing inflation risks.

Meanwhile, the risk-sensitive Australian dollar rose 0.14% to $0.7054.

Gold prices rose in European trading on Tuesday, recovering from three-month lows as the US dollar weakened and global oil prices declined. The rebound comes as the ceasefire between Iran and Israel remains in effect, strengthening expectations that a final peace agreement between Washington and Tehran could be reached soon.

Lower oil prices are helping ease concerns about accelerating inflation, potentially giving major central banks more room to keep interest rates unchanged in the near term while increasing expectations for rate cuts over the longer term.

Price Overview

• Gold prices today: Gold rose 0.5% to $4,351.55, up from the opening level of $4,330.26, after touching an intraday low of $4,313.12.

• At Monday’s close, gold prices ended little changed after earlier falling to a three-month low of $4,268.92 per ounce.

US Dollar

The US Dollar Index fell 0.2% on Tuesday, extending losses for a second consecutive session and moving further away from the two-month high of 100.21 points, reflecting continued weakness in the US currency against a basket of major currencies.

As is well known, a weaker dollar makes dollar-denominated gold more attractive to buyers holding other currencies.

Beyond profit-taking activity, the dollar has weakened following Trump's success in halting military exchanges between Iran and Israel, alongside continued commitment to the diplomatic track aimed at ending the conflict and containing geopolitical tensions in the Middle East.

Global oil prices

Oil prices dropped by more than 2% on Tuesday as military tensions between Iran and Israel eased, reinforcing expectations that a broader Middle East peace agreement could be reached, helping reopen the Strait of Hormuz to stranded oil tankers and restore normal supply flows.

Developments in the Iran conflict

• Iran and Israel announced a temporary halt to military strikes.

• US President Donald Trump called on both sides to stop exchanging fire immediately.

• Israel believes the brief confrontation may strengthen its negotiating position.

• Israel has largely been excluded from the ongoing US-Iran peace talks.

• Pakistani Prime Minister Shehbaz Sharif stated that the “ultimate objective” of the Washington-Tehran peace negotiations is close to being achieved.

• Trump and Vice President JD Vance said Washington would declare a “complete victory” and expects a long-term settlement of the Iranian nuclear issue within the next two weeks.

• Trump: We are in the final stages of reaching an agreement with Iran and want to get it done.

• Trump: I do not believe there are any remaining sticking points with Iran, and we are very close to a deal.

• Trump: An agreement with Iran could be reached within “two or three days,” and the Strait of Hormuz would reopen “immediately.”

US interest rates

• Goldman Sachs expects the Federal Reserve to leave interest rates unchanged throughout 2026 and postpone any rate cuts until 2027, citing stronger economic activity and continued job growth.

• According to the CME FedWatch Tool, the probability of a Federal Reserve rate hike at the December meeting declined from 75% to 55%.

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

• Investors are closely monitoring key US economic releases this week, particularly the May inflation report due on Wednesday, which could significantly influence interest rate expectations.

Gold outlook

Tim Waterer, Chief Market Analyst at KCM Trade, said gold is trading calmly as investors remain uncertain about the durability of the Iran-Israel ceasefire and are cautious ahead of this week’s important US inflation data, which will help shape expectations for Federal Reserve policy.

Waterer added that gold could still rise toward $5,500 by the end of the year, partly driven by continued central bank demand, although such a move would likely require lower oil prices, Treasury yields, and a weaker US dollar.

SPDR Gold Trust

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged on Monday, remaining at 1,019.92 metric tons, the lowest level since October 13, 2025.

The euro rose in European trading on Tuesday against a basket of global currencies, extending its recovery for a second consecutive session from a three-month low against the US dollar. The move was supported by buying interest at lower levels and improved risk appetite after the halt in military escalation between Iran and Israel, strengthening speculation that a final peace agreement in the Middle East may be approaching.

Lower global oil prices are also helping to ease concerns about accelerating inflation, supporting expectations that the European Central Bank may keep its monetary policy tools unchanged for an extended period this year.

Price overview

• Euro exchange rate today: The euro rose by around 0.15% against the dollar to $1.1548, up from the opening level of $1.1533. The session low was recorded at $1.1527.

• The euro closed Monday’s session up 0.1% against the dollar after earlier touching its lowest level in nearly three months at $1.1500.

US dollar

The US Dollar Index fell by approximately 0.15% on Tuesday, extending losses for a second consecutive session and moving further away from its two-month high of 100.21 points, reflecting continued weakness in the US currency against a basket of major and minor currencies.

In addition to profit-taking activity, the dollar has come under pressure following Trump’s success in halting the exchange of military strikes between Iran and Israel, while reaffirming commitment to the diplomatic path aimed at ending the conflict and containing geopolitical tensions in the Middle East.

Oil prices

Oil prices declined by more than 1% on Tuesday as military tensions between Iran and Israel eased, boosting expectations that a peace agreement in the Middle East may be near. Such an agreement could help reopen the Strait of Hormuz to stranded oil tankers and restore supply flows to normal levels.

Developments in the Iran conflict

• Iran and Israel announced a temporary halt to military strikes.

• US President Donald Trump called on both sides to cease hostilities immediately.

• Israel believes the brief confrontation may strengthen its position in negotiations.

• Israel has largely been excluded from the ongoing US-Iran peace talks.

• Pakistani Prime Minister Shehbaz Sharif stated that the “ultimate objective” of peace negotiations between Washington and Tehran is close to being achieved.

• Trump and Vice President JD Vance said Washington expects to declare a “complete victory” and reach a long-term settlement of the Iranian nuclear issue within the next two weeks.

• Trump said: “We are in the final stages of reaching an agreement with Iran, and we want to get this resolved.”

• Trump added: “I do not believe there are any major sticking points with the Iranians, and we are very close to reaching an agreement.”

European interest rates

• As oil prices declined, money markets reduced the probability of a 25-basis-point interest rate increase by the European Central Bank in June from 95% to 85%.

• Investors are now awaiting additional economic data from the eurozone, particularly inflation, unemployment, and wage figures, to reassess interest rate expectations.

• Reuters sources indicated that the European Central Bank is still highly likely to raise interest rates in June, given inflation forecasts that continue to point toward an undesirable scenario.