Oil Slumps as Ceasefire Hopes Grow. Gold Rebounds Ahead of a Pivotal Fed Week

Signs of a possible pause in the US-Iran conflict triggered a sharp reversal across commodity markets on Monday, sending oil prices sharply lower while lifting gold as investors shifted their focus back to the Federal Reserve.

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Brent crude plunged more than 7%, falling back below the $90-a-barrel mark, while WTI crude retreated from last week's six-week high near $92.25. The benchmark briefly dropped to around $84 before trimming part of its losses, as hopes for renewed diplomatic talks between Washington and Tehran eased concerns over supply disruptions in the Middle East.

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The collapse in oil prices has quickly changed the inflation narrative. With energy prices retreating, traders have scaled back expectations that the recent spike in crude would force the Federal Reserve into a more aggressive tightening stance. The US Dollar also pulled back from a one-month high, providing additional support for precious metals.

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Gold responded by rebounding above $4,100 an ounce, recovering roughly $40 from Friday's lows. Lower Treasury yields and softer Fed hike expectations improved demand for the non-yielding metal, although investors remain cautious ahead of this week's FOMC policy decision.

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The Federal Reserve is now back at the center of the market. While policymakers are widely expected to leave interest rates unchanged, investors will closely watch Chair Kevin Warsh's comments for clues on whether the recent easing in energy prices is enough to reduce inflation concerns or whether another rate hike remains firmly on the table.