Peace Deal: Crude Prices To Be Range-Bound, Precious Metals To Take Off After Oct

 Chennai: The announcement of the US-Iran peace deal, crude oil prices dropped around 4 per cent, while gold and silver prices looked positive. While crude prices will remain in a range due to damaged energy infrastructure, gold and silver prices may resume their rally after October if the reported US-Iran agreement is signed and peace is maintained. The supply situation of some of the base metals are tight and weather conditions will keep agri commodity prices firm, finds Ajay Kedia, MD, Kedia Commodities.

The immediate reaction to the U.S.-Iran deal has been a sharp fall in crude prices. Is the geopolitical risk premium completely out of the markets? How do you see crude prices moving in the near to medium term?

It is still too early to conclude that the geopolitical risk premium has completely disappeared. Since the conflict began in late February, there have been several instances when statements from the U.S. administration suggested that a settlement was near, only for tensions to persist.

The ceasefire announcement has certainly reduced the war premium. Before the conflict, Brent crude was trading around $60-65 a barrel. Prices subsequently surged to nearly $120 before correcting sharply. While a significant portion of the risk premium has come off, some uncertainty remains, particularly until the situation stabilises further.

The damage to energy infrastructure will take time to repair, which should keep prices range-bound in the near term. For Brent crude, I expect support around $76-77 a barrel and resistance around $100-105. For WTI, the range could be $70-73 on the downside and $94-95 on the upside. In the short term, prices will remain largely news-driven, but over the longer term there is room for further correction.

How much additional oil can Iran realistically bring to the market if sanctions are eased, and what could that mean for global oil balances?

Iran has an estimated 140-170 million barrels of crude already stored in floating storage that can be brought to the market relatively quickly. In addition, it can increase production by about 500,000 to 700,000 barrels per day within three to six months.

If the conflict is fully resolved and the Strait of Hormuz remains open, Brent crude could average around $75-78 a barrel over the next couple of months. The return of Iranian supply would certainly ease concerns about global oil availability.

If Iranian crude returns to the market, how will that affect India's dependence on Russian crude and the discounts Indian refiners currently enjoy?

India's energy relationship with both Russia and Iran is longstanding. When sanctions were imposed on Iran in the past, India remained one of its major customers. Therefore, the return of Iranian crude will not fundamentally alter India's sourcing strategy.

What is likely to happen is a gradual rebalancing. Some of the volumes that shifted from Iran to Russia due to sanctions could move back. Russian supplies may decline marginally, while Iranian supplies increase. However, both countries have historically offered discounts because of sanctions-related constraints, and India will continue to benefit from competitive pricing from both sources.

The conflict had pushed up aluminium and other industrial metal prices. Will a lasting peace deal reverse those gains, or will supply-side constraints continue to support prices?

Aluminium was among the first beneficiaries when geopolitical tensions escalated. Concerns about energy availability and production costs pushed prices higher. Aluminium smelting is highly energy-intensive and rising natural gas and crude oil prices significantly increased production costs.

If sanctions are eased and the Strait of Hormuz remains open, aluminium prices could face some short-term pressure. We may see a pullback towards $3,500-3,600 per tonne on the LME and around ₹350-360 in the domestic market.

However, I do not expect a sharp correction because demand fundamentals remain strong. Overall, the outlook for aluminium continues to be positive.

What about other base metals such as copper and zinc?

We remain particularly bullish on copper and zinc. Economic growth and industrial expansion inevitably translate into higher demand for these metals.

Copper demand is being supported by artificial intelligence, semiconductor manufacturing and data centre expansion. While inventories have risen due to trade-related concerns, supply disruptions in countries such as Peru, Chile and Indonesia continue to support prices.

Zinc also remains attractive because of ongoing supply constraints. Among the base metals, I would rank copper first, aluminium second and zinc third in terms of investment potential.

Gold usually benefits during periods of geopolitical uncertainty. Why has gold not reacted as strongly as expected during this conflict, and what is your outlook going forward?

This is not the first time gold has behaved differently from conventional expectations during a geopolitical crisis. When large-scale uncertainty triggers a broad sell-off across asset classes, investors often book profits in gold and silver to meet liquidity needs elsewhere.

Although the ceasefire has supported some recovery in precious metals, the outlook over the next few months remains cautious. Rising inflation in the United States and the possibility of higher interest rates could limit upside potential.

In the short term, gold and silver may remain in a consolidation phase. Gold could face pressure towards the $3,500-3,600 range, while silver could also experience a pullback after brief rallies.

Does that mean the long-term outlook for gold and silver remains positive?

Absolutely. I remain very bullish over the long term.

One of the biggest structural themes supporting gold is de-dollarisation. While no currency currently has the capacity to replace the U.S. dollar globally, gold is increasingly being used as an alternative store of value and reserve asset.

We are already seeing countries conduct transactions outside the traditional dollar-based framework. Over the next few years, gold and silver could move substantially higher. However, I expect consolidation and correction to continue until around October. After that, a fresh long-term rally could begin.

How have agricultural commodities reacted to the U.S.-Iran deal, and which commodities stand to gain the most?

Commodity cycles typically begin with crude oil. Rising energy prices lead to inflation, which then supports precious metals, followed by industrial metals and eventually agricultural commodities.

The conflict disrupted the movement of key fertiliser inputs such as urea and ammonia through the Strait of Hormuz. As a result, fertiliser-intensive crops such as corn, wheat and oilseeds benefited from supply concerns.

While lower energy and fertiliser costs may provide some near-term relief, I remain constructive on agricultural commodities because supply chains need to be rebuilt and inventories replenished.

So could there be a short-term decline in agri commodities before another rally emerges?

There could be some temporary easing, but the broader outlook remains positive.

A weaker rupee supports exports, while weather-related concerns—particularly the risk of a strong El Niño event—could affect foodgrain production. Supply shortages and inventory rebuilding could also support prices.

Over the next six to twelve months, we remain bullish on agricultural commodities due to weather risks, geopolitical uncertainties and fertiliser-related supply issues.

Are we witnessing a structural shift in commodity markets, or is this merely a short-term correction driven by geopolitics?

I believe there is a genuine structural shift underway.

Traditionally, commodities attracted limited participation from institutional investors. Over the last few years, however, we have seen increased interest from family offices, alternative investment funds and multi-asset investment strategies.

At the same time, geopolitical tensions and climate-related disruptions have strengthened the fundamental case for commodities. Greater participation combined with tighter supply conditions means commodity markets are likely to experience sharper gains and greater volatility than in the past.

In this environment, how should commodity investors position themselves?

Commodities often act as a leading indicator for broader financial markets because supply-demand imbalances are reflected there first.

Investors should avoid chasing crude oil after sharp moves. Instead, they should consider increasing exposure to agricultural commodities and selected industrial metals.

Gold and silver should continue to form a core part of portfolios, accounting for roughly 18-20% of overall allocation. Beyond precious metals, investors should also look at opportunities in base metals and agricultural commodities, where the medium- to long-term outlook remains favourable.