[MARKET ANALYSIS] Crude underpinned as Trump is dissatisfied with Iran’s response, but prices wane off highs on potential diplomacy

Geopolitics continues to be the underlying driving force of price action. In short, Iran submitted its response to the latest US proposal to end the war, with Trump calling it “TOTALLY UNACCEPTABLE”. Iranian state media said the US proposal amounted to Tehran surrendering to Trump’s excessive demands. Iran’s counter-position stressed US compensation for war damages, recognition of Iranian sovereignty over the Strait of Hormuz, sanctions relief and release of blocked assets. In terms of diplomacy, Pakistani journalist Mallick posted, "To my understanding, Contrary to publicly put out positions and statements, diplomacy and back channel talks and contacts between Iran and US to work out a draft agreement continues to be in the works -- Diplomacy is not dead." This morning, Iran’s Foreign Ministry spokesperson Baghaei said "currently, we are focusing our discussions on ending the war and the uranium issue, which we will discuss later", Al Mayadeen reports. WSJ reported on Friday that the US and Iran were working with mediators on a 14-point MoU for a month of talks, potentially as early as next week in Islamabad.
WTI and Brent futures are firmer but off best levels following the initial pop higher on the rejection, with the prospect of ongoing efforts to negotiate taking some sting out of the punchy rhetoric from the US and Iran. WTI Jun hit a high of USD 100.37/bbl (vs low 96.92/bbl) before waning levels under USD 97.50/bbl at the time of writing, though still +2% intraday. Brent July has dipped back under USD 104/bbl from an earlier USD 105.99/bbl peak. Dutch TTF also rose in early trade before waning from a high near EUR 45.50/MWh to a low just under EUR 44.50/MWh.
Spot gold is modestly softer as the firmer crude prices keep the USD underpinned, though the bullion resides in a narrow USD 4,648.09-4,705.56/oz range at the time of writing, remaining under its 100 DMA (USD 4,781/oz). Spot silver, however, is choppy on either side of the USD 80/oz mark after briefly topping Friday’s USD 81.57/oz peak, with the 100 DMA at USD 80.60/oz.
Base metals are mixed with sentiment cautiously positive in recent trade as energy prices came off best levels and provided a slight boost to the risk tone. 3M LME copper remains north of USD 13.5k/t in a USD 13,515.70-13,650.20/t range.