[MARKET ANALYSIS] Crude holds a mild upward bias but wanes off its best levels as US and Iran prefer diplomacy

In geopolitics, the US and Iran both signalled a preference for diplomacy. US VP Vance said Washington is making progress in talks and remains focused on a diplomatic path “for now”, reiterating that Tehran must not obtain nuclear weapons. Iranian Foreign Minister Araghchi also said Iran does not seek war. However, tensions remain elevated: Tehran warned that new confrontations with the US are possible, said its forces are ready to deliver a “crushing” response if attacked, and confirmed it is preparing new navigation laws for the Strait of Hormuz. Separately, Iran accused Kuwait of unlawfully attacking an Iranian boat and detaining four Iranian citizens near an island allegedly linked to US operations. Shipping risks also rose after UKMTO reported that a vessel northeast of Fujairah was taken by unauthorised personnel and moved toward Iranian waters, alongside reports that Iran is using Caspian Sea routes, highways and rail links to China to bypass the US blockade of Hormuz.
In terms of the Trump-Xi summit, the US and Chinese presidents struck a notably warm tone during talks in Beijing. Both leaders emphasised cooperation, future ties and the need to resolve disputes through dialogue. Trade remained one of the key focuses, after reports suggested the US and China are weighing tariff cuts on around USD 30bln of imports and shifting toward managed trade targets rather than structural reform. Trump said US-China relations would be better than before and trade would become “totally reciprocal”. Xi told US CEOs that China’s door “will only open wider”, welcomed stronger cooperation with US firms and warned there are no winners in a trade war. Commercial and technology ties also improved at the margin, with China renewing export licences for more than 400 US beef plants and the US reportedly approving around 10 Chinese firms, including Alibaba, ByteDance, Tencent and JD.com, to buy NVIDIA H200 chips. However, Taiwan remains the key strategic flashpoint, with Xi calling it the most important issue in US-China relations and warning that mishandling it could trigger clashes.
Crude markets are holding a mild positive bias but trade off best levels following the diplomacy-first approach by the US and Iran, whilst the positive US-China commentary could also be underpinning the benchmarks, with a positive relation between the world's largest two economies conducive for global growth. That being said, eyes also remain on whether China, if at all, will try to influence Iran on the Strait of Hormuz situation (and what this will cost the US). WTI July (+0.4%) resides in a 95.48-97.50/bbl range while its Brent July (+0.5%) counterpart sits in a USD 104.57-106.40/bbl range. Sticking with energy, Dutch TTF meanwhile is choppy but posts mild gains (+0.2%) above EUR 47/MWh at the time of writing
In terms of metals, spot gold is choppy within a narrow range, and largely within yesterday’s parameters after finding support near yesterday’s trough (4,669.53/oz). Newsflow has remained somewhat light this morning with no real macro drivers. Spot gold resides in a USD 4,668.71-4,718.88/oz at the time of writing. Spot silver, meanwhile, is consolidating with modest losses above USD 87/oz after gaining for yet another session yesterday, bringing the win streak to seven straight sessions. HSBC raised its average silver price forecasts to USD 75/oz in 2026 and USD 68/oz in 2027.
Over to base metals, subdued trade seen across the majors amid a lack of fresh macro drivers and despite the sanguine tone from the Trump-Xi summit. Copper futures pulled back from record levels despite the broadly positive risk sentiment, with 3M LME copper briefly dipping under USD 14,000/t to trade in a current USD 13,887.50- 14,132.78/t range.