Oil Prices Remain Volatile Amid US-Iran Conflict and Fed Decision

Geopolitical tensions in the Middle East have eased slightly after a pause in US airstrikes against Iran, but oil prices remain volatile as traders await the outcome of diplomatic talks. The US military's naval blockade of Iran remains fully operational, and Washington has warned that it will resume attacks if negotiations fail.

The price of Brent crude briefly surged to $102 per barrel last week, its highest level since May, due to increased fighting in the region and concerns about a return to all-out war. However, oil prices eased on Sunday after the US and Iran refrained from launching military strikes for a second straight day.

The pause in airstrikes has provided some relief to global oil supplies, but tensions have shifted towards the Red Sea following attacks by Iran-aligned Houthi forces on Saudi Aramco facilities in Jizan and Yanbu. Additionally, another front has emerged in the Caspian Sea, where Iran accused Ukraine of attacking an Iranian commercial vessel.

The US Federal Reserve's policy decision later this week will also be closely watched by traders, who expect interest rates to remain unchanged but are looking for clues on future rate cuts and policymakers' assessment of inflation risks. Investors will also monitor upcoming US economic data, including inflation and labor market indicators, for further signals on the Fed's policy path.

Gold prices have surged in recent weeks due to surging weakness in oil prices, which has supported a reversal in gold futures. However, everything remains uncertain as both sides have warned they remain prepared to resume military action if talks break down.