Easing Iran Tensions Trigger 5% Oil Slump After Trump Says Deal Is in “Final Stages”

Market Wrap-up: Oil Slump and Softer Iran Tensions Boost Risk Appetite Across Global MarketsUS President Donald Trump once again drove broad market volatility during the previous session after softening his earlier hawkish stance and suggesting that negotiations with Iran were approaching a final stage.

The shift in rhetoric improved market sentiment following several sessions of geopolitical pessimism earlier this week. As a result, US equities staged a strong rebound, with the Dow Jones rallying nearly 650 points.

Meanwhile, softer US 10-year Treasury yields and a sharp decline in the US Dollar Index toward the 98.97 area helped lift gold prices by more than 1% during the session.

The most notable move came from the energy market, where both Brent and WTI crude fell roughly 5%. Markets appear increasingly sensitive to any signal pointing toward a de-escalation in the Middle East conflict or a reopening of the Strait of Hormuz, as lower oil prices would reduce inflation pressure and support expectations for lower interest rates.

Trump’s comments also helped offset the impact of the latest FOMC meeting minutes. The minutes showed that Fed officials remain concerned about persistent inflation pressures and still want clearer evidence before considering any rate cuts.

Should negotiations with Iran genuinely move into a final phase as Trump suggested, many analysts now expect Brent crude to cool toward the $80/barrel region. However, in a worst-case scenario where the Strait of Hormuz remains blocked through year-end, oil prices could move closer toward $200/barrel.

Looking ahead, markets will focus on a fresh batch of US data including the Philly Fed Manufacturing Index, Unemployment Claims, Flash Manufacturing & Services PMI, along with comments from FOMC member Thomas Barkin.

Gold: Gold Rebounds as Falling Oil Prices and Lower Treasury Yields Ease Inflation Concerns

Key takeaway:

Gold prices rose 1% on May 20 as expectations for a potential resolution to the Iran conflict weighed heavily on oil prices, easing inflation concerns and pulling US Treasury yields away from recent highs.The US 10-year Treasury yield edged lower after touching its highest level since January 2025 on May 19. Higher bond yields typically increase the opportunity cost of holding non-yielding assets such as gold.Citigroup maintained a cautious near-term outlook on gold and set a three-month target at $4,300/oz.

Technical Outlook:Daily Bias: Bearish.Support: 4,404Resistance: 4,589

WTI: WTI Falls Below $100 as Trump Signals Iran Negotiations Near Final Stage

Key takeaway:

US WTI crude prices fell back below the $100/barrel mark on May 20 after President Donald Trump stated that negotiations with Iran had entered the “final stage.”According to an analysis released by Wood Mackenzie on May 20, oil prices could approach $200/barrel under a worst-case scenario where the Strait of Hormuz remains blocked through the end of the year.However, oil prices could decline sharply if the US and Iran reach a peace agreement that allows Hormuz to reopen before June. Under that scenario, spot Brent crude could retreat toward the $80/barrel area by the end of 2026.

Technical Outlook:Daily Bias: Bullish.Support: 97.24    Resistance: 102.87

DXY: US Dollar Softens as Improving Risk Sentiment Reduces Safe-Haven Demand

Key takeaway:

The US Dollar Index (DXY) traded with a mild downside bias as improving market sentiment reduced safe-haven demand for the US dollar.At the same time, the latest FOMC meeting minutes showed that Federal Reserve officials remain concerned about persistent inflation pressures.As a result, policymakers continue to seek clearer evidence before making any decision on interest rates, helping stabilize US Treasury yields.

Technical Outlook:Daily Bias: Bullish.Support: 99.00Resistance: 99.50

EUR/USD: EUR/USD Holds Steady Ahead of PMI Data and ECB Rate Expectations

Key takeaway:

The euro traded sideways as markets balanced the Fed’s hawkish stance against ongoing developments surrounding a potential US-Iran agreement.In addition, preliminary May PMI data from the Eurozone, Germany, and the United States are scheduled for release later today.Currently, around 85% of economists surveyed by Reuters expect the European Central Bank (ECB) to raise the deposit rate by 25 basis points to 2.25% in June, up from just over half prior to the April meeting.

Technical Outlook:Daily Bias: Bullish.Support: 1.15662  Resistance: 1.16548

USD/JPY: Japanese Yen Strengthens After Japan Trade Balance Beats Forecasts

Key takeaway:

The Japanese Yen maintained its upward momentum following stronger-than-expected domestic trade balance data.Japan’s trade balance returned to a surplus of JPY 301.9 billion in April 2026, reversing a JPY 149.5 billion deficit recorded a year earlier and significantly outperforming market expectations for a JPY 29.7 billion deficit.Japanese exports surged 14.8% year-over-year, reaching near-record levels at JPY 10,507.3 billion. This marked an acceleration from March’s 11.5% growth pace and the strongest export growth in three months.

Technical Outlook:Daily Bias: Bullish.Support: 158.00  Resistance: 159.50

Overall, markets are primarily reacting to expectations that Middle East tensions could ease following softer rhetoric from President Trump regarding Iran. The sharp decline in oil prices has pulled US Treasury yields lower, supporting a rebound in equities while also helping gold recover despite the Fed maintaining a cautious stance on inflation.

The US dollar weakened as safe-haven demand faded, while risk assets benefited from expectations that energy-driven inflation pressures may continue to ease in the near term.

Market focus now shifts toward upcoming PMI data, jobless claims, and comments from FOMC member Thomas Barkin to assess whether the US economy remains resilient enough for the Fed to maintain a hawkish stance for longer.

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