Oil prices rose by more than 1% amid continued restrictions on shipping traffic through the Strait of Hormuz, which overshadowed expectations for the resumption of talks between the United States and Iran aimed at ending the war in the Middle East.

After 45 days since the Iranian Revolutionary Guard announced the closure of the Strait—through which approximately 20% of global oil and liquefied natural gas (LNG) shipments pass—navigation remains unstable despite a two-week truce. Sources indicate that the number of transiting vessels represents only a fraction of the more than 130 daily trips recorded before the outbreak of the war.

Brent crude contracts rose by $1.30, or 1.4%, to reach $96.09 per barrel, after declining 4.6% in the previous session. U.S. West Texas Intermediate (WTI) crude also climbed by $1.01, or 1.1%, to $92.29 per barrel, following a drop of nearly 7.9% in the previous session.

This rise came despite the increase in stock indices on Tuesday as optimism grew regarding a potential resolution to the conflict, with the S&P 500 approaching record highs.

U.S. President Donald Trump stated that talks with Tehran might resume this week after ending without an agreement over the weekend. Meanwhile, the United States has also imposed a naval blockade on Iranian ports, which its forces confirmed has completely halted maritime trade to and from Iran.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted that the optimism driven by hopes of a deal has begun to fade. she pointed out that even in the event of a rapid breakthrough and the reopening of the Strait of Hormuz, supply bottlenecks in essential commodities such as oil, gas, fertilizers, and helium could take a long time to recede.

Amid these disruptions, refiners are urgently seeking alternative crude supplies, leading to a rise in price premiums, especially for oil from regions such as the U.S. Gulf Coast and the North Sea. A shipment of WTI Midland for delivery in Rotterdam was traded at a record premium of $22.80 above European benchmarks.

In another development, a U.S. destroyer stopped two oil tankers attempting to leave Iran on Tuesday, according to a U.S. official.

An analyst at SEB bank stated that reopening the Strait does not depend on Washington alone, as Iran has its own calculations. Tehran may view the continued restrictions on oil flows as a strategic leverage tool, whether to obtain compensation, security guarantees, or to achieve political gains ahead of the U.S. midterm elections.

The market may also face further supply shortages after two U.S. administration officials indicated that Washington will not renew a 30-day sanctions waiver for seaborne Iranian oil that expires this week, in addition to the expiration of a similar waiver for Russian oil over the weekend.

Later today, investors await official U.S. inventory data from the Energy Information Administration (EIA). Expectations point to a slight increase in crude oil inventories last week, against a potential decrease in gasoline and distillate stocks.

Sources familiar with American Petroleum Institute (API) data also reported that crude oil inventories in the United States recorded an increase for the third consecutive week.

The U.S. dollar approached its lowest levels in six weeks on Wednesday, giving up most of the gains it achieved since the outbreak of the war with Iran, amid signs of the potential resumption of a new round of talks between Washington and Tehran, which boosted investor risk appetite.

Since the start of the war between the United States and Israel on one side and Iran on the other on February 28, Tehran has effectively closed the Strait of Hormuz, a vital waterway through which about one-fifth of global oil and gas shipments pass, leading to a sharp rise in energy prices and increased concerns regarding the impact on global growth and inflation.

Washington imposed a blockade on Iranian ports after the collapse of weekend talks, but U.S. President Donald Trump said on Tuesday that talks to end the war may resume in Pakistan within the coming days, which contributed to strengthening investor confidence and reducing demand for the dollar as a safe haven.

Regarding other currencies, the euro declined slightly by 0.1% to $1.177, near its highest levels since March 2, and the British pound also fell slightly to $1.355.

As for the dollar index, which measures the performance of the American currency against a basket of six major currencies, it returned to its level at the end of February, after having risen by about 3% in early March.

Although the talks that took place in Islamabad last weekend did not yield a breakthrough, raising doubts about the sustainability of a two-week truce that still has one week remaining, investors still hold onto hopes that diplomatic efforts will lead to a solution.

The dollar had benefited significantly from safe-haven flows in March; however, optimism regarding the ceasefire and the possibility of reaching a settlement pushed it to decline by about 2% this month against major currencies.

With the continuation of the state of uncertainty, Lee Hardman, currency strategist at MUFG Bank, warned against rushing to bet on a further decline of the dollar, noting that markets may be overly optimistic about a quick return to normalcy.

He added that there is a risk that markets are underestimating the scale of the energy price shock and its potential impact on the global economy.

Investors are currently focusing on the extent of the damage that may befall the global economy due to the energy shock, especially with physical oil prices trading above $140 per barrel, although futures contracts have returned to below $100.

The International Monetary Fund had lowered its global growth forecasts due to rising energy prices, warning that the world is already heading toward a more negative scenario with a sharper slowdown in growth.

In the worst-case scenarios, the Fund sees the global economy approaching the brink of recession, with average oil prices reaching $110 per barrel in 2026 and $125 in 2027.

On the other hand, the Japanese yen declined by 0.14% to 158.95 against the dollar, and it remains below its pre-war levels, affected by the rising costs of imported energy.

The rise in oil and natural gas prices also led markets to price in the possibility of both the European Central Bank and the Bank of England raising interest rates this year to curb inflation, while even a single interest rate cut by the Federal Reserve has become a matter of doubt.

Former U.S. Treasury Secretary Janet Yellen considered that one interest rate cut by the Fed is still possible this year, despite inflationary pressures resulting from supply shocks associated with the war, noting that the central bank will continue to closely monitor inflation expectations while keeping its options open.

Gold prices declined in European markets on Wednesday, giving up a four-week high recorded earlier in Asian trading due to the activity of correction and profit-taking operations, coinciding with pressure from the recovery of U.S. dollar levels in the foreign exchange market.

The levels of the American currency recovered while awaiting new developments regarding the talks between the United States and Iran, as intensive diplomatic efforts continue to push for a new round of peace negotiations following the stumbling of the previous round hosted by Pakistan.

Price overview

• Gold prices today: Gold metal prices fell by 1.0% to ($4,792.82), from the opening level of trading at ($4,841.30), and recorded a high of ($4,871.34), the highest since March 18.

• Upon price settlement on Tuesday, gold prices achieved an increase of 2.2%, in the first gain within the last three days, amid optimism regarding the U.S.-Iranian talks.

The U.S. Dollar

The dollar index rose on Wednesday by about 0.2%, holding above a six-week low of 97.97 points, on its way toward achieving its first gain in the last eight days, reflecting a recovery in the levels of the American currency against a basket of global currencies.

As we know, the rise in the levels of the American currency makes gold bullion priced in U.S. dollars less attractive to buyers holding other currencies.

Aside from buying operations from cheap levels, U.S. dollar levels are recovering as investors refrain from risk, awaiting the emergence of more positive indicators regarding the talks between the United States and Iran.

Diplomatic efforts

Diplomatic efforts continue, sponsored by Pakistan, Turkey, and some other countries, to bring viewpoints closer between the United States and Iran and to push toward engaging in a new round of negotiations, following the stumbling of the previous round held in the Pakistani capital, Islamabad, on Friday.

Media reports confirmed that a new round of negotiations between Washington and Tehran may be held in Islamabad during the coming days, with the Swiss capital, Geneva, proposed as a potential alternative for the second round of U.S.-Iranian negotiations.

U.S. President Donald Trump stated on Tuesday that talks to end the war with Iran may resume in Pakistan within the next two days, after the collapse of the previous round of negotiations, which prompted Washington to impose a blockade on Iranian ports.

U.S. interest rates

• According to the "FedWatch" tool of the CME Group: the pricing of the probabilities of keeping U.S. interest rates unchanged at the April meeting is currently stable at 99%, and the pricing of the probabilities of raising interest rates by about 25 basis points is at 1%.

• In order to re-price those probabilities, investors are closely following the release of more economic data from the United States.

Gold performance expectations

Edward Meir, an analyst at Marex, said: Gold prices are affected in the short term by news from the Middle East, amid hopes of the two countries entering into negotiations.

Meir added: If things worsen again, we may return to the pre-ceasefire pattern, where gold prices fell, the dollar rose, and stock prices fell.

SPDR Fund

Gold holdings at the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, increased on Tuesday by about 2.29 metric tons, bringing the total up to 1,049.48 metric tons, rebounding from a total of 1,047.19 metric tons "which is the lowest level since March 30."

The euro declined in European markets on Wednesday against a basket of global currencies for the first time in the last eight days against the U.S. dollar, giving up a six-week high due to the activity of correction and profit-taking operations.

This comes in conjunction with the American currency holding above its low levels, awaiting new developments regarding the talks between the United States and Iran, as intensive diplomatic efforts continue to push for a new round of peace negotiations following the stumbling of the previous round hosted by Pakistan.

With the current decline in global oil prices, indications are increasing that inflationary pressures on monetary policy makers at the European Central Bank are receding, which reduces the likelihood of raising European interest rates this year.

Price overview

• Euro exchange rate today: The euro fell against the dollar by 0.2% to ($1.1779), from today's opening price of ($1.1795), and recorded a high of ($1.1802).

• The euro ended Tuesday's trading up by 0.3% against the dollar, in its seventh consecutive daily gain, within the longest streak of daily gains this year, and recorded a six-week high of $1.1811, amid the possibility of holding a new round of U.S.-Iranian negotiations.

The U.S. Dollar

The dollar index rose on Wednesday by about 0.2%, holding above a six-week low of 97.97 points, on its way toward achieving its first gain in the last eight days, reflecting a recovery in the levels of the American currency against a basket of global currencies.

Aside from buying operations from cheap levels, U.S. dollar levels are recovering as investors refrain from risk, awaiting the emergence of more positive indicators regarding the talks between the United States and Iran.

Diplomatic efforts

Diplomatic efforts continue, sponsored by Pakistan, Turkey, and some other countries, to bring viewpoints closer between the United States and Iran and to push toward engaging in a new round of negotiations, following the stumbling of the previous round held in the Pakistani capital, Islamabad, on Friday.

Media reports confirmed that a new round of negotiations between Washington and Tehran may be held in Islamabad during the coming days, with the Swiss capital, Geneva, proposed as a potential alternative for the second round of U.S.-Iranian negotiations.

Global oil prices

Global oil prices fell on Wednesday by about 1%, continuing their losses for the second consecutive day, with signs appearing that Washington and Tehran continue to revive peace talks, despite the United States beginning a blockade of the Strait of Hormuz.

European interest rates

• Lagarde, President of the European Central Bank, said: The bank is ready to raise interest rates even if the expected rise in inflation is short-term.

• With the decline in global oil prices, the money market pricing of the probabilities of the European Central Bank raising European interest rates by about 25 basis points in April fell from 35% to 15%.

• Sources reported to Reuters that the European Central Bank is likely to begin discussing raising interest rates during the meeting of this month.

• In order to re-price the above probabilities, investors await the release of more economic data in the eurozone regarding the levels of inflation, unemployment, and wages.