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

Chennai: Following the announcement of the US-Iran peace deal, crude oil prices fell around 4 percent, while gold and silver prices also looked positive. Although crude oil prices will remain in a certain range due to the damaged energy infrastructure, gold and silver prices may continue to rise after October if the US-Iran agreement is signed and peace is achieved. Ajay Kedia, MD, Kedia Commodities, says supply situation of some base metals is tight and weather conditions will keep agricultural commodity prices stable.

The initial reaction to the US-Iran deal was a sharp decline in crude oil prices. Has the markets’ geopolitical risk premium completely ended? How do you think crude oil prices will move in the near and medium term?

It is too early to conclude that the geopolitical risk premium has completely disappeared. Since the conflict began in late February, there have been many statements that the US administration has claimed that a deal is close, but tensions remain.

Declaring a ceasefire certainly lowered the war premium. Before the conflict, Brent crude oil was trading around $60-65 per barrel. Prices later rose to around $120 before correcting sharply. Although a significant part of the risk premium has decreased, some uncertainty remains, especially until the situation stabilizes further.

It will take time to repair the damage to the energy infrastructure, which will cause prices to remain in a certain range in the near term. I expect support around $76-77 per barrel and resistance around $100-105 for Brent crude oil. For WTI, this range may be $70-73 on the downside and $94-95 on the upside. In the short term, prices will remain largely news driven, but there is room for further correction in the long term.

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

Iran currently has an estimated 140-170 million barrels of crude oil stored in floating warehouses that can be brought to market relatively quickly. It could also increase production by about 500,000 to 700,000 barrels per day within three to six months.

If the conflict is completely resolved and the Strait of Hormuz remains open, Brent crude oil is expected to average around $75-78 per barrel in the next few months. The return of Iranian supplies would certainly ease concerns about global oil availability.

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

India’s energy relations with both Russia and Iran have been going on for a long time. When sanctions were imposed on Iran in the past, India remained one of Iran’s major customers. Therefore, the return of Iranian crude oil will not fundamentally change 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 may return. While Iran’s supply increases, Russia’s supply may decrease slightly. However, both countries have historically offered discounts due to sanctions-related restrictions, and India will continue to benefit from competitive pricing from both sources.

The conflict has increased prices for aluminum and other industrial metals. Will a permanent peace agreement reverse these gains, or will supply-side constraints continue to support prices?

When geopolitical tensions rose, aluminum was among the first beneficiaries. Concerns about energy availability and production costs have caused prices to rise. Aluminum smelting is a highly energy-intensive process, and rising natural gas and crude oil prices have significantly increased production costs.

Aluminum prices may face short-term pressure if sanctions are eased and the Strait of Hormuz remains open. 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 as demand fundamentals remain strong. Overall, the outlook for aluminum remains positive.

What about other base metals like copper and zinc?

We continue to rise especially in copper and zinc. Economic growth and industrial expansion inevitably lead to increased demand for these metals.

Copper demand is supported by artificial intelligence, semiconductor manufacturing and data center expansion. While stocks increase due to trade concerns, supply disruptions in countries such as Peru, Chile and Indonesia continue to support prices.

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

Gold often provides benefits during periods of geopolitical uncertainty. Why did gold not react as strongly as expected during this conflict and what is your view going forward?

This isn’t the first time gold has behaved differently from conventional expectations during a geopolitical crisis. When large-scale uncertainty triggers a widespread 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 for the next few months remains cautious. Rising inflation and the possibility of higher interest rates in the US could limit upside potential.

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

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

Definitely. I remain very bullish in the long term.

One of the biggest structural themes supporting gold is dedollarization. While no currency globally is currently capable of replacing the US dollar, gold is increasingly used as an alternative store of value and reserve asset.

We are already seeing countries trading outside the traditional dollar-based framework. Gold and silver could rise significantly over the next few years. However, I predict that consolidation and correction will continue until October. After this, a new long-term rally may begin.

How have agricultural commodities reacted to the US-Iran deal and which commodities will benefit the most?

Commodity cycles often start with crude oil. Rising energy prices lead to inflation, which first supports precious metals, then industrial metals, and finally agricultural commodities.

The conflict has disrupted the transit of important fertilizer inputs such as urea and ammonia through the Strait of Hormuz. As a result, fertilizer-intensive crops such as corn, wheat and oilseeds have benefited from supply concerns.

While lower energy and fertilizer costs may provide some relief in the short term, I remain constructive on agricultural commodities as supply chains need to be rebuilt and stocks replenished.

So could there be a short-term decline in agricultural commodities before another rally occurs?

There may be a temporary relaxation, but the general outlook remains positive.

While the weakening of the rupee will support exports, weather concerns (especially the risk of a strong El Niño event) may impact foodgrain production. Supply shortages and rebuilding stocks may also support prices.

We remain bullish on agricultural commodities over the next six to twelve months due to weather risks, geopolitical uncertainties and fertilizer-related supply issues.

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

I believe real structural change is underway.

Traditionally, commodities have seen limited participation from institutional investors. However, over the last few years 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.

How should commodity investors position themselves in this environment?

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

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

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