The first round of US-Iran negotiations in Switzerland ended Monday with a joint statement from mediators Qatar and Pakistan outlining a roadmap to a final agreement within 60 days, a mechanism to end fighting in Lebanon, and a communications line to ensure safe passage for commercial ships through the Strait of Hormuz. Brent crude futures dropped nearly 2 per cent to $79.09 a barrel, unwinding the risk premium that had accumulated after Tehran announced it had closed the waterway. Spot gold rebounded 0.9 per cent to $4,197.41 an ounce from its lowest since 11 June, while the dollar index held near 100.9, just below a one-year high.

The diplomatic progress directly eased the primary market concern: a prolonged disruption to Hormuz oil flows. Shipping data had shown a sharp fall in transits on Sunday. Chris Weston, head of research at Pepperstone in Melbourne, noted the physical crude market remains tight and that FX and commodity flows will stay heavily influenced by the energy complex. Gold’s recovery came despite mounting expectations of further Federal Reserve rate increases, as the drop in oil prices tempered inflation fears, though the hawkish rate outlook continues to cap the metal’s upside.

Sterling slipped 0.22 per cent to $1.3209 as traders assessed political uncertainty in Britain, where Prime Minister Keir Starmer is weighing his future after Andy Burnham’s decisive by-election victory. Strategists at OCBC in Singapore and Commonwealth Bank of Australia in Sydney said current signals suggest Burnham would adhere to existing fiscal rules, limiting sterling’s downside; a loosening of those rules, they warned, would be poorly received by the gilt market. The euro softened 0.15 per cent to $1.14555, and the Australian dollar dipped 0.17 per cent to $0.7005.

The yen weakened to 161.66 per dollar, hovering just below last week’s two-year low. A break above 161.96 would mark its weakest level since 1986. Finance Minister Satsuki Katayama reiterated in Tokyo that authorities stand ready to act, but analysts at StoneX in Sydney and State Street in Hong Kong cautioned that intervention may prove ineffective against a hawkish Fed and strong US fundamentals. US two-year Treasury yields rose to 4.2276 per cent, the highest since early 2025, as markets priced in 43 basis points of tightening this year with a 25-basis-point hike fully expected by September. The immediate focus for oil markets is whether the safe-passage mechanism restores normal tanker traffic through Hormuz; for currency markets, the threshold is a break above 161.96 in dollar/yen, which could prompt a response from Tokyo.