Red Sea Risks Collide with Fed Policy in Critical Week for Commodities

A critical week lies ahead for commodity markets as geopolitical tensions and monetary policy risks converge. The conflict in the Red Sea has escalated, with Iran's dismissal of negotiations signaling a distant diplomatic off-ramp.

The sharp rise in Fed rate hike expectations, now at one-in-three, is unlikely to be enough for the central bank to act next week. Commodities markets are navigating a complex risk environment, with oil prices surging 10% this week.

Crude prices pulled back nearly 4% on Friday after reports of potential US-Iran negotiations resuming. The greenback closed the week 0.7% higher at 101.46, while spot gold posted only its seventh weekly gain in 21 weeks since the Iran war began.