Global commodity markets suffered a broad-based sell-off on Thursday as easing geopolitical tensions and a firmer US dollar combined to strip away risk premiums that had driven prices to record or multi-year highs in recent weeks.
Prices of precious metals, crude oil, and industrial commodities all declined sharply, with silver leading losses after an extraordinary rally.
The pullback followed signs of improving diplomatic relations between the world’s major powers, including renewed engagement between Washington and Beijing and the resumption of US-Iran talks aimed at de-escalating tensions in the Middle East.
Market analysts said the moves reflected a sudden reassessment of geopolitical risk rather than a collapse in underlying demand, although concerns over global growth and monetary tightening continue to loom.
Commodities slide as global tensions ease
The sell-off underscored how sensitive commodity markets remain to geopolitical developments.
Commodities slide as global tensions ease became the dominant theme across trading desks in Asia and Europe after confirmation that US President Donald Trump and Chinese President Xi Jinping had held a direct phone call, signalling a pause in escalating trade frictions.
At the same time, Washington and Tehran agreed to hold diplomatic talks in Oman later this week, raising hopes that the risk of military confrontation in the Middle East — a key oil-producing region — may be reduced, at least in the short term.
Silver prices plunged nearly 15 percent, marking one of the steepest daily declines in years, while gold, crude oil, and copper each fell by about 2 percent. Iron ore prices also slipped, weighed down by high inventories, while soybeans bucked the broader trend on expectations of increased Chinese purchases.
Precious metals reverse from record highs
The most dramatic moves were seen in precious metals, which had surged to record levels amid heightened geopolitical uncertainty and expectations of looser global monetary conditions.
Spot gold retreated from near one-week highs after climbing to a record $5,594.82 per ounce last week. Silver, which had soared to an all-time high of $121.64, saw a far sharper correction as traders rushed to lock in profits.
Market strategists described the volatility as a natural consequence of crowded positioning and thin liquidity.
“We saw extreme volatility in precious metals this week, and what we are witnessing now are the aftershocks,” said Tony Sycamore, an analyst at brokerage firm IG.
“With US-Iran talks back on the table and US-China tensions easing, a significant portion of the geopolitical premium has evaporated.”
Gold, traditionally seen as a safe-haven asset, tends to lose appeal when geopolitical risks fade and when the US dollar strengthens — a dynamic that was clearly on display during Thursday’s trading session.
Stronger dollar pressures commodities
A strengthening US dollar added further downward pressure across commodity markets.
The dollar index, which measures the greenback against a basket of major currencies, hovered near a two-week high as investors positioned ahead of interest rate decisions from the European Central Bank and the Bank of England.
Because commodities are priced in dollars, a stronger greenback makes them more expensive for buyers using other currencies, dampening demand and encouraging profit-taking.
The dollar’s advance has also been supported by shifting expectations around US monetary policy.
Earlier this week, President Trump nominated Kevin Warsh as the next chair of the Federal Reserve, a move widely interpreted by markets as signalling a more hawkish stance on inflation.
A tighter monetary outlook raises opportunity costs for holding non-yielding assets such as gold and silver, further weakening investor appetite.
Oil drops as Middle East risk premium fades
Crude oil prices fell about 2 percent as fears of supply disruptions eased following confirmation that the US and Iran would engage in talks in Oman.
The Middle East accounts for a significant share of global oil production, and recent tensions had pushed prices higher on concerns that any military escalation could disrupt exports through critical shipping routes.
Analysts noted that even tentative diplomatic engagement can have an outsized impact on oil prices when markets are heavily priced for risk.
“Talks between Iran and the United States have removed some of the geopolitical premium from oil markets,” Sycamore said, adding that traders are reassessing worst-case supply disruption scenarios.
Despite the pullback, oil prices remain elevated by historical standards, supported by disciplined production from OPEC+ and ongoing uncertainty around global demand growth.
Copper and industrial metals under pressure
Industrial metals also faced headwinds, with copper prices sliding amid concerns about demand and rising inventories in warehouses monitored by the London Metal Exchange.
Copper, widely used in construction, manufacturing, and renewable energy infrastructure, is often viewed as a barometer of global economic health. While prices had recently rebounded on news that China plans to expand its strategic copper reserves, sentiment has since turned more cautious.
Analysts cited worries about slowing growth in major economies and uneven recovery in China’s property sector as factors weighing on demand expectations.
“Sentiment has turned soggy across most asset classes,” said Christopher Wong, a strategist at OCBC, noting that losses across commodities, cryptocurrencies, and equities were feeding into one another amid low liquidity conditions.
Agricultural markets diverge
Not all commodities followed the downward trend. Soybean prices rose to a two-month high after President Trump said China was considering buying cargoes from the United States, raising hopes of improved agricultural trade ties between the world’s two largest economies.
The comments reignited speculation that Beijing may increase purchases of US farm products as part of broader efforts to stabilise relations with Washington.
Elsewhere, iron ore prices fell about 2 percent, pressured by elevated stockpiles and lingering concerns over steel demand.
Volatility likely to persist
Market participants caution that commodity price swings are unlikely to subside in the near term, given the complex interplay of geopolitics, monetary policy, and global growth risks.
While easing diplomatic tensions have triggered a sharp correction, unresolved issues — including inflation, central bank policy paths, and fragile geopolitical ceasefires — could quickly reintroduce volatility.
For now, investors appear focused on recalibrating positions after a period of extreme moves, with many opting to reduce exposure until clearer signals emerge.
As one trader in Singapore put it, “This is not the end of uncertainty — it’s just a reminder of how fast sentiment can turn.”
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