Oil prices declined on Tuesday, giving back part of the strong gains recorded in the previous session, as Iran reviewed a proposed US agreement aimed at ending the conflict between the two countries, according to Iran’s Mehr News Agency.

Brent crude futures fell by $1.13, or 1.2%, to $93.85 per barrel by 11:30 GMT, while US West Texas Intermediate crude dropped $1.09, or 1.2%, to $91.07 per barrel.

Both benchmarks had surged more than 5% on Monday after posting losses exceeding 16% during May, driven by market optimism over the possibility of a peace agreement.

US President Donald Trump said on Monday that negotiations with Iran remain ongoing and expressed confidence that an agreement could be reached next week to extend the ceasefire and reopen the Strait of Hormuz.

A source cited by Mehr News Agency said that Iran has not yet responded to the final draft of the proposed temporary agreement.

Focus shifts to the Strait of Hormuz and oil inventories

Despite developments in the negotiations, Giovanni Staunovo, an analyst at UBS, noted that oil flows through the Strait of Hormuz remain constrained due to the ongoing conflict in the region.

Separately, the head of the oil industry and markets division at the International Energy Agency warned on Tuesday that global oil inventories could fall to critically low or historically tight levels ahead of peak summer demand if current stock drawdowns continue.

An executive at the Abu Dhabi National Oil Company also suggested that August could mark a turning point toward higher oil prices if demand recovers while supply disruptions linked to the conflict with Iran persist.

Tim Waterer, Chief Market Analyst at KCM Trade, said that the market is currently focused on whether negotiations between Washington and Tehran produce tangible progress or setbacks, as well as on the tone of statements issued by both sides, particularly Iranian threats regarding the Strait of Hormuz and actual tanker traffic through the waterway.

He added that the direction of negotiations will determine whether the current geopolitical risk premium remains embedded in oil prices or begins to fade.

Major disruption to global energy flows

Since the outbreak of the conflict, Iran has effectively imposed restrictions on most non-Iranian shipping entering and leaving the Gulf, disrupting roughly one-fifth of global oil and liquefied natural gas flows and driving prices more than 50% higher.

At the same time, the United States continues to maintain a blockade on Iranian ports.

Lebanon announced a partial ceasefire between Hezbollah and Israel on Monday, representing a limited de-escalation within the broader conflict that helped ignite the wider war involving Iran.

US inventories expected to decline

According to a preliminary Reuters survey, US crude oil inventories are expected to have fallen by approximately 3.6 million barrels in the week ending May 29, extending the decline recorded in the previous week.

Gasoline and distillate inventories are also expected to have decreased.

Fresh escalation in Ukraine

In a separate development, Russia launched large-scale attacks on Ukrainian cities early Tuesday using hundreds of drones and dozens of missiles. Ukrainian authorities said the strikes killed 18 people and injured more than 100 others.

The US dollar traded within a narrow range on Tuesday as investors monitored any signs of progress toward an agreement to reopen the Strait of Hormuz, while also awaiting key US economic data later in the day that could help shape expectations for Federal Reserve monetary policy.

A peace agreement between the United States and Iran would ease pressure on oil-importing economies such as Japan and the eurozone, while also reducing demand for the US dollar as a safe-haven asset.

US President Donald Trump said on Monday that talks with Iran remain ongoing, despite reports that Tehran had suspended indirect negotiations with Washington aimed at ending hostilities. The reports contributed to a modest decline in oil prices.

Investors remain cautious about any news suggesting progress toward ending the US-Israeli conflict with Iran, given the fragile nature of the ceasefire agreement reached between Washington and Tehran in early April.

Meanwhile, Lebanon’s announcement on Monday of a limited ceasefire between Hezbollah and Israel failed to provide a meaningful boost to market sentiment.

The US Dollar Index, which measures the greenback against a basket of six major currencies, slipped 0.05% to 99.05. The index has traded within a relatively tight range of approximately 98.9 to 99.5 since May 15.

According to Michael Pfister, markets regained some relief by Monday evening as it appeared the US president had successfully helped secure another ceasefire in Lebanon.

He added that foreign exchange markets are likely to remain highly sensitive to geopolitical headlines throughout the day, while any setbacks in negotiations will be viewed with considerable caution.

The dollar initially benefited from the conflict with Iran, which began on February 28, supported by safe-haven demand and the US economy’s relatively limited exposure to inflation caused by higher energy prices.

However, the currency has since surrendered part of those gains amid uncertainty surrounding the future course of the conflict.

Focus shifts to US data

Later today, the US Department of Labor will release job openings data ahead of Friday’s closely watched monthly employment report, as markets continue to bet that the Federal Reserve’s next move will be a rate hike.

Paul Mackel said that a combination of loose financial conditions in the United States, fading safe-haven support for the dollar, and the Fed’s cautious tone has kept the currency contained.

He added that a turning point may be approaching, with markets increasingly focused on incoming economic data and future guidance from central banks, particularly the Federal Reserve.

Mackel also highlighted the Federal Reserve policy meeting scheduled in two weeks.

Economists surveyed by Reuters expect Friday’s employment report to show that the US economy added 85,000 jobs in May, while the unemployment rate is projected to remain unchanged at 4.3%.

The 160 yen level remains in focus

In Japan, Finance Minister Satsuki Katayama said on Tuesday that authorities stand ready to intervene in currency markets if necessary, although she declined to comment on recent exchange-rate movements.

The Japanese yen weakened slightly to ¥159.72 per dollar, moving closer to the ¥160 level that markets widely regard as a potential trigger for official intervention.

Masafumi Yamamoto said that if USD/JPY breaks above 160, the risk of surpassing the April 30 high would increase significantly, raising the likelihood of stronger verbal warnings, fresh rate checks, or direct market intervention.

Investors are also awaiting remarks from Kazuo Ueda on Wednesday for clues on whether the central bank intends to proceed with a rate increase next week.

Derek Halpenny noted that policy action remains likely and that, even with softer inflation, the risk of falling behind economic developments continues to grow.

Markets still lean toward higher US rates

Despite recent developments, investors remain largely convinced that the Federal Reserve’s next move is likely to be a rate increase.

According to Fed Funds futures, a 25-basis-point rate hike remains fully priced in by March 2027, while markets currently assign roughly a 60% probability to such a move by December.

With geopolitical uncertainty still elevated, market participants appear reluctant to abandon expectations for tighter monetary policy.

Even if geopolitical tensions ease further, inflation is expected to remain elevated for longer. Oil prices continue to trade well above year-ago levels, while a 6% increase in the US Producer Price Index (PPI) during April points to the risk of persistent consumer inflation in the months ahead.

During today’s session, dollar traders are expected to focus on the April JOLTS job openings report ahead of Friday’s Nonfarm Payrolls release, as they assess whether continued labor market strength could allow the Federal Reserve to raise interest rates sooner than currently expected.

Gold prices climbed more than 1% in European trading on Tuesday, resuming gains after a brief pause on Monday and heading toward a two-week high. The rally was supported by a weaker US dollar and lower oil prices, as optimism grew over a potential peace agreement in the Middle East, particularly following a partial ceasefire agreement in southern Lebanon.

Investors are now awaiting a series of key US labor market reports beginning today, which could help reshape expectations for the future path of Federal Reserve interest rates.

The Price

• Gold prices today: Gold rose 1.3% to $4,541.65 per ounce, from an opening level of $4,485.06, after touching an intraday low of $4,463.02.

• At Monday’s close, gold lost 1.2%, its first decline in three sessions, due to corrective selling and profit-taking after reaching a two-week high of $4,595.33 per ounce.

• Beyond profit-taking activity, gold prices also came under pressure from renewed military tensions between the United States and Iran.

US dollar

The US Dollar Index fell about 0.15% on Tuesday, resuming the losses that began late last week and reflecting weakness in the US currency against a basket of major and minor currencies.

The decline comes as risk appetite improves following a partial ceasefire agreement between Hezbollah and Israel, boosting hopes for further progress in ongoing peace negotiations between Washington and Tehran.

Oil prices

Global oil prices fell more than 2% on Tuesday, moving back toward five-week lows as expectations increased for a peace agreement between the United States and Iran and the eventual reopening of the Strait of Hormuz.

Top News

• Lebanon announced a partial ceasefire between Hezbollah and Israel.

• Trump said: “I had a very productive call with Hezbollah through high-level representatives, and they have agreed to a full ceasefire.”

• Trump said negotiations with Iran are continuing at a rapid pace.

• Trump stated that he is not concerned about oil prices, which surged after reports that Iran may fully close the Strait of Hormuz and suspend negotiations with the United States.

• Iran is seeking an end to hostilities on all fronts, along with the lifting of the naval blockade and easing of economic sanctions.

US interest rates

• According to the CME FedWatch Tool, market pricing for a Federal Reserve rate hike in December has fallen from 53% to 35%.

• The probability of leaving interest rates unchanged in June declined from 100% to 98%, while the probability of a 25-basis-point rate cut increased from 0% to 2%.

• Investors will continue monitoring incoming US economic data and comments from Federal Reserve officials to reassess interest-rate expectations.

• Later today, the US Job Openings report for April will be released. On Wednesday, markets will receive the ADP private employment report for May, followed by weekly jobless claims on Thursday and the official May nonfarm payrolls report on Friday.

Gold outlook

Market strategist Ilya Spivak said that investors entered the week expecting a possible 60-day ceasefire extension agreement over the weekend. However, both sides appear to have maintained their red lines, and no final agreement has been reached.

Spivak added that the key upside barrier remains near $4,900. If gold can firmly regain a foothold above the $5,000 level, it would signal a return to its long-term bullish trend.

SPDR Gold Trust

Gold holdings in SPDR Gold Trust declined by 0.28 metric tons on Monday, marking a third consecutive daily decrease. Total holdings now stand at 1,028.86 metric tons, the lowest level since October 15, 2025.

The euro slipped slightly in European trading on Tuesday against a basket of global currencies, extending its losses for a second consecutive session against the US dollar and moving further away from a two-week high. The decline comes amid profit-taking and corrective selling, as well as risk aversion driven by investor caution ahead of further developments in the ongoing peace negotiations between the United States and Iran.

Following recent media reports and the rebound in global oil prices, expectations for a European Central Bank rate hike at the June meeting have increased. Investors now await the release of the eurozone’s key inflation data for May later today to reassess those expectations.

The Price

• Euro exchange rate today: The euro fell by less than 0.1% against the US dollar to $1.1627, from an opening level of $1.1632, while the session high stood at $1.1635.

• The euro closed Monday down 0.2% against the dollar, its first loss in three sessions, due to corrective selling and profit-taking after reaching a two-week high of $1.1686 on Friday.

• Beyond profit-taking activity, the euro also came under pressure following limited military exchanges between the United States and Iran.

US dollar

The US Dollar Index rose about 0.1% on Tuesday, maintaining gains for a second consecutive session and reflecting continued strength in the US currency against a basket of global currencies.

The advance comes as investors remain cautious and avoid taking excessive risk while awaiting the outcome of negotiations between Washington and Tehran aimed at ending the conflict and reopening the Strait of Hormuz.

Top News

• Lebanon announced a partial ceasefire between Hezbollah and Israel.

• Trump said: “I had a very productive call with Hezbollah through high-level representatives, and they have agreed to a full ceasefire.”

• Trump said negotiations with Iran are continuing at a rapid pace.

• Trump stated that he is not concerned about oil prices, which surged after reports that Iran may fully close the Strait of Hormuz and suspend negotiations with the United States.

• Iran is seeking an end to hostilities on all fronts, along with the lifting of the naval blockade and easing of economic sanctions.

European interest rates

• Sources told Reuters that the European Central Bank is highly likely to raise interest rates in June due to inflation expectations moving toward an undesirable scenario.

• With global oil prices rising, money markets have increased the probability of a 25-basis-point ECB rate hike at the June meeting from 75% to 95%.

Eurozone inflation

To reassess expectations for European interest rates this year, investors are awaiting the release of the eurozone’s May inflation data later today, which will provide further insight into inflationary pressures facing policymakers at the European Central Bank.

At 09:00 GMT, the annual eurozone Consumer Price Index is expected to show a 3.2% increase in May, up from 3.0% in April. Core inflation is expected to rise by 2.4%, compared with 2.2% in the previous month.

Outlook for the euro

We expect that if inflation data comes in hotter than current market expectations, the probability of a European interest rate hike in June will increase further, which would support higher euro levels against a basket of global currencies.