A wave of market volatility swept across commodities and currencies on Wednesday as US President Donald Trump confirmed ongoing negotiations with Iran aimed at ending hostilities in the Middle East, prompting a sharp decline in oil prices and a rally in gold. Trump stated, 'They're talking to us, and they're talking sense,' explaining his decision to delay strikes on Iranian energy infrastructure due to the ongoing talks, although Iran denied direct negotiations with Washington [6]. Iranian officials expressed a preference to negotiate with US Vice President JD Vance rather than other envoys, highlighting trust issues and uncertainty in ceasefire discussions [1][4]. Israeli officials remain skeptical about Iran agreeing to US demands, and talks reportedly broke down on February 28 following the US-Israeli war on Iran [1]. Messages have been exchanged via Pakistan, which has emerged as a mediator, with the possibility of an in-person meeting in the coming days [3].
Oil markets reacted strongly, with West Texas Intermediate (WTI) crude falling below $87.00 per barrel, down roughly 5%, and Brent crude futures dropping around 6% to $98.31 per barrel [4][6]. The American Petroleum Institute reported US crude inventories rose by 2.3 million barrels for the week ending March 20, further pressuring prices [4]. The Canadian Dollar (CAD) weakened as oil prices softened, trading around 1.3770 USD/CAD, while the US Dollar also came under pressure amid the diplomatic developments [3].
Gold prices surged, with spot gold up 2.56% to $4,588 per ounce and gold futures for April delivery rising over 4% to $4,597.7 per ounce [6]. Goldman Sachs attributed the recent gold pullback to higher interest rate expectations and market volatility but maintained a bullish outlook, forecasting gold to reach $5,400 by year-end, supported by central bank buying as countries seek safer assets [6]. The dollar index was down 0.17% in early Asian hours [6].
The New Zealand Dollar (NZD) also weakened, with NZD/USD falling to around 0.5830, as traders sought safety in the US Dollar amid the ongoing Middle East conflict [1][2]. Reserve Bank of New Zealand Chief Economist Paul Conway noted lingering slack in the economy, with unemployment at 5.3%, and indicated that the central bank's response to inflationary aftershocks from higher oil prices would depend on the extent of second-round effects [2]. Fitch Ratings downgraded New Zealand's outlook to negative, citing risks from the Iran war due to the country's dependence on energy imports [1]. At press time, NZD/USD was down 0.15% to 0.5827 [2].
Federal Reserve Bank of Chicago President Austan Goolsbee warned that energy shocks could pose risks to both sides of the Fed's mandate, and the outlook for US interest rate cuts remains uncertain, depending on the conflict's duration and inflation progress [3].
CONCLUSION
The US-Iran peace talks have triggered a sharp decline in oil prices, boosting gold and impacting major currencies. The NZD and CAD weakened as traders sought safety and commodity-linked currencies suffered from lower oil prices. While central banks and analysts remain cautious about inflation and rate outlooks, Goldman Sachs maintains a bullish forecast for gold, expecting continued central bank buying amid geopolitical uncertainty.