Commodities slide as Trump signals Iran de-escalation

Brent crude dropped 7.3% to $91.15 a barrel on Monday as Donald Trump paused plans for repeated strikes against Iran and signalled a preference for diplomatic options. The move reversed a sharp rally from the prior week that had pushed oil to multi-month highs.

The White House decision caught traders who had positioned for escalation. Brent had surged above $98 on Thursday on speculation the U.S. would widen its military campaign. Friday's close at $98.33 gave way to a gap lower at the Monday open, and the selling accelerated through the Asian session.

"The market had priced in at least a week of sustained strikes. That premise collapsed over the weekend," said a Singapore-based crude trader. "Positioning is heavy on the long side, and there's not much support until $88."

The pullback rippled across commodity markets. Iron ore futures in Singapore held near flat at $98.10 a tonne, but copper and aluminium both shed early gains as the dollar strengthened. U.S. natural gas futures slipped to $2.80 per gigajoule.

Gold edged up 0.2%, catching a modest safe-haven bid that oil did not share. The metal has traded in a $2,330-2,380 range this month, with traders watching for a break above $2,400 if Middle East tensions escalate again.

The question for crude bulls is whether Monday's drop is a correction in a still-bullish trend or the start of a deeper unwind. Inventory data from the U.S. Energy Information Administration on Wednesday will give the next read on physical demand. Analysts polled by Reuters expect crude stockpiles fell by 2.2 million barrels last week.

For now, the trade is unwinding the risk premium that built up during July. The prompt spread for Brent narrowed to 52 cents a barrel from 78 cents a week ago, a sign that market tightness assumptions are softening.

On Wall Street, the S&P 500 closed up 0.5% and the Nasdaq composite down 0.6% on Friday. Focus turns to earnings from Microsoft, Meta, Apple, and Amazon over the next four days, along with the Federal Reserve's rate decision on Wednesday. The Fed is expected to hold rates steady, but any dovish language could push the dollar lower and support commodity prices.

The U.S. CPI report due Wednesday is the week's other major data point. A hot print would strengthen the case for rates to stay higher for longer, a headwind for commodities priced in dollars.

In Australia, the ASX 200 is called up 0.9% at the open. The local reporting season unofficially kicks off with Rio Tinto's update on Wednesday. Resources quarterlies from Stanmore, IGO, Whitehaven Coal, MinRes, Fortescue, and Woodside dot the calendar through the week.

Vulcan Energy has started civil construction at the 30-megawatt geothermal power plant for its Lionheart project in Germany. Lynas Rare Earths signed a $29 million agreement with South Korea's LS Eco Energy to develop ex-China processing. Talga Group struck an offtake deal with Japan's Hanwa.

The Australian dollar bought US 69.9 cents.

MSFT stock page is among the big tech names reporting this week.