Currency and precious metals markets reflected improved risk appetite Monday after President Donald Trump announced that diplomatic discussions with Iran had been productive enough to warrant a five-day delay in planned US military strikes. The dollar fell 0.4% against a basket of major currencies while gold declined 2.5% to $4,388 per ounce, moves that indicated investors were reducing defensive positions built during weeks of escalating tensions. Equity markets rallied globally as traders interpreted the development as reducing the immediate threat of expanded conflict.
The confrontation between Washington and Tehran has produced one of the most severe energy supply disruptions in decades. Iranian forces have effectively blocked the Strait of Hormuz, which handles approximately one-fifth of global oil and liquefied natural gas trade. International Energy Agency chief Fatih Birol has compared the resulting crisis to the combined severity of the 1970s oil shocks and the market turmoil following Russia’s invasion of Ukraine. Trump had set a 48-hour deadline on Saturday for Iran to reopen the strait, heightening expectations of imminent military action before Sunday’s diplomatic breakthrough.
Stock markets across Europe recovered from steep early losses to finish higher. The German Dax rose 1.2%, the Spanish Ibex gained 1%, and the French Cac 40 advanced 0.8%. London’s FTSE 100 had a particularly turbulent session, plunging nearly 1.5% before recovering to trade briefly positive, though it ultimately closed down 0.2%. US markets were trading more than 1% higher by early afternoon. The improved sentiment reflected relief that immediate escalation had been avoided.
Energy prices fell substantially across the commodity complex. Brent crude oil dropped 10% to $101 per barrel, retreating from the $119.50 peak reached earlier this month. UK natural gas futures declined 6% to 142 pence per therm. Oil company shares fell despite the broader market rally, with BP and Shell both losing more than 3% as geopolitical risk premiums contracted. The decline in gold reflected expectations that reduced inflation pressures could make aggressive interest rate increases less likely, diminishing the appeal of assets that do not pay yields.
Challenges remain substantial despite the temporary easing of tensions. Iran has threatened extensive retaliation against regional infrastructure, including vital water systems, should American attacks proceed. British Prime Minister Keir Starmer held emergency Cobra meetings with key ministers and Bank of England Governor Andrew Bailey to coordinate economic responses and assess energy security. UK borrowing costs showed modest improvement, with the 10-year bond yield falling to 4.95% after touching 5% last week. British households continue to face significant energy bill increases when existing price protections expire at the end of June.