Following 13 consecutive days of military strikes, the confrontation between the United States and Iran abruptly entered a pause over the weekend, triggering a sharp reversal in global commodity markets. During Monday's Asian trading session, the international benchmark Brent crude oil futures opened with a decline of over 7%, breaching the key $90 per barrel level. WTI crude oil futures also fell significantly, dropping more than 5% to around $84 per barrel. Simultaneously, spot gold opened nearly $40 higher, briefly touching $4,096 per ounce, a gain of over 1%. This sudden market shift stems from a tacit understanding reached between Washington and Tehran over the weekend – the U.S. has halted airstrikes on Iran, and Iran has concurrently suspended its retaliatory actions. Market sentiment is rapidly reversing from the extreme pricing of a "war premium," but whether this rebound is a trend reversal or a fleeting moment depends on the interplay of multiple variables this week.

Ceasefire in Hostilities: A 'Diplomatic Window' After 13 Days of Strikes

On July 24th, U.S. President Donald Trump broke with his pattern of the previous two weeks, which had involved daily approvals of military strike plans, by ordering the U.S. military not to launch strikes on Iran that day. Subsequently, the U.S. military refrained from new airstrikes for two consecutive nights. U.S. Permanent Representative to the United Nations, Mike Waltz, stated on Sunday that the pause was intended to "create more space" for diplomatic negotiations. Iran has reciprocated by pressing its own pause button. Iranian military spokesman Akraminia confirmed that, due to the U.S. military's lack of attack, Iran has suspended its retaliatory actions in line with its "tit-for-tat" strategy of proportionality. Concurrently, an Omani delegation has arrived in Iran for talks on new arrangements to reopen the Strait of Hormuz. An Iranian Foreign Ministry spokesperson described the talks with Oman on the management of secure shipping in the Strait as "productive and yielding some progress." However, the fragility of this ceasefire cannot be ignored. Iranian sources have expressed "more skepticism than optimism" about the sincerity of the U.S. ceasefire, viewing it more as a tactical adjustment than a genuine change of heart. President Trump himself has sent mixed signals – stating that Iran is "serious this time" while also threatening to "raise it to a higher level if necessary."

Oil Market Turmoil: Brent Crude Breaks Below $90, Yet Still Up 30% This Month

The news of the "pause" sent oil markets into an immediate tailspin. Global benchmark Brent crude fell more than 7% within minutes of the open, briefly dipping below $90 per barrel before recovering to around $92. WTI crude oil futures dropped about 5.5% to $84.40 per barrel. European natural gas prices also plummeted, falling as much as 7.8%. This sharp decline is set against the backdrop of a massive rally in oil prices – driven by the U.S.-Iran conflict spreading from the Strait of Hormuz to the Red Sea, Brent crude has surged approximately 30% this month, briefly surpassing $100 per barrel last week. The conflict has now been ongoing for nearly five months, sparking widespread concerns about a global inflationary shock. Even with the U.S. pausing its strikes, the conflict in the Red Sea continues to escalate. Yemen's Houthi group claimed to have attacked three Saudi oil tankers within 48 hours and continues to enforce a maritime blockade against vessels linked to Saudi Arabia. Saudi Arabia's Yanbu – which has become the kingdom's primary oil export port since the Strait of Hormuz was effectively closed, handling millions of barrels per day – along with the Saudi Aramco refinery and export terminal in Jizan, remain under threat. Saul Kavonic, a senior energy analyst at MST Marquee, commented, "The pause in strikes and reports of progress in talks have raised expectations of a potential pathway to de-escalation again. However, all key issues, including Iran's control over the Strait and its missile and nuclear programs, remain intractable, making any ceasefire highly likely to be temporary."

Gold Rebounds: Shifting from Safe-Haven Pressure to Easing Inflation Concerns

In tandem with the oil price crash, gold experienced a long-awaited rebound. Spot gold opened nearly $40 higher at $4,096.33 per ounce, a gain of approximately 1%. Silver's rally was even more pronounced, rising over 2.8% during the session. The logic behind gold's rise is clear and direct: the pause in the U.S.-Iran conflict has alleviated oil supply risks, thereby cooling inflation concerns. The fall in oil prices also partially eased the pressure on the Federal Reserve to raise interest rates, leading to the U.S. dollar index opening lower and falling, once down 0.23%. However, the rebound potential for gold remains constrained by multiple factors. Independent metals trader Tai Wong noted that while gold and silver appear to be forming a base around $3,950 and $55 respectively, the possibility of prices breaking below these levels cannot be ruled out if the conflict escalates sharply. The probability of the Fed raising interest rates this year remains as high as 92%, and coupled with Iran's skepticism about the sincerity of the ceasefire, gold's short-term upside is limited. Since the U.S.-Iran conflict erupted in late February, gold has fallen by more than a fifth from its near-record high of around $5,600 per ounce. Currently hovering around the $4,000 mark, gold is caught in a perpetual tug-of-war between "geopolitical inflation" and "rate hike expectations."

The Pricing Foundation: The Fed's 'Complex Equation'

This sudden geopolitical shift has made this week's Federal Reserve meeting even more unpredictable. Just a few weeks ago – when the June CPI recorded its largest single-month decline since April 2020 – market bets on a July rate hike were pushed down to around 10%. However, within a few short weeks, a triple shock reversed this narrative: the resurgent Middle East war pushed Brent crude above $100, the Trump administration announced new tariffs of 10% to 12.5% on 60 countries, and the AI investment boom continued to drive demand. As of last week's close, federal funds futures indicated the probability of a 25-basis-point rate hike this week had risen to approximately 36%. Monday's oil price crash undoubtedly provides new ammunition for the argument to hold rates steady. The problem, however, is that the Fed's reference point is the June inflation data, not intraday oil price swings in July. The earlier oil price surge had already increased concerns about persistent inflation, while the price-boosting effects of the new tariffs and the AI investment boom have not yet been fully factored in. Analysts suggest this meeting "could be the most difficult to predict in years." The hawkish faction within the Fed has also built up to a critical mass. Dallas Fed President Lorie Logan and Cleveland Fed President Beth Hammack have both called for a rate hike, and both hold voting rights at this meeting. Citi predicts that more than two dissenting votes would be interpreted by the market as a stronger hawkish signal. The Federal Reserve is scheduled to hold its policy meeting on July 28-29. The meeting has been dubbed "the most difficult to predict in years" by the market. Surging oil prices and energy costs have increased inflation risks, but recent U.S. inflation and employment data have been relatively moderate, also providing a rationale for keeping rates unchanged. The Fed's impending interest rate decision makes this policy game exceptionally complex. While the sharp drop in oil prices has eased inflation anxiety, the earlier price surge above $100 had already significantly raised rate hike expectations. In the interplay of a "geopolitical pause" and a "policy cliffhanger," global capital markets are entering one of the most uncertain weeks in recent years.