Oil prices surged around 25% on Monday to their highest since mid-2022, with Brent on track ‌for a record one-day gain, while gold fell 2% as an escalating Iran war squeezed world energy supplies, boosted the dollar and dampened hopes of interest-rate cuts.

Agriculture markets, led by edible oils, rose as they took their cue from oil prices due to the extensive use ​of vegetable oils in making biofuels. Aluminium firmed on supply worries even as other metals faced headwinds from ​a stronger dollar.

“The violent reaction stems from the markets seeing no obvious offramp in the escalating ⁠Middle East conflict, now a high-stakes standoff where neither side appears willing to blink first,” Tony Sycamore, IG market ​analyst, said in a note.

“The risk of more lasting economic damage continues to build by the day.”

Iran on Monday named Mojtaba Khamenei ​to succeed his father Ali Khamenei as Supreme Leader, signalling that hardliners remain firmly in charge in Tehran a week into its conflict with the United States and Israel.

SOARING OIL LIFTS VEGOILS, GRAINS

Brent was on track for its biggest one-day gain ever in both percentage and ​absolute terms as the expanding U.S.-Israeli war with Iran led some major Middle Eastern oil producers to cut supplies and ​on fears of prolonged disruption to shipping through the Strait of Hormuz chokepoint.

Brent crude futures climbed to a high of $119.50 per barrel ‌and U.S. ⁠West Texas Intermediate (WTI) to $119.48 a barrel.

“…the situation appears to be deteriorating further,” ING analysts said in a note. “In addition, upstream oil production has started to shut in, with producers facing storage constraints. Iraq, Kuwait, and the UAE began reducing oil production.”

In agricultural markets, Malaysian palm oil rose 9% and Chicago soybean oil climbed to its highest since late 2022, buoyed by ​the crude oil rally. Wheat ​rose to its highest ⁠since June 2024 and corn prices hit a 10-month high.

Gold fell more than 2% as a stronger dollar weighed on greenback-priced bullion, while higher energy costs fuelled inflation concerns and further ​dimmed the prospects for near‑term reductions in interest rates.

The dollar hovered near a three-month ​high hit last ⁠week, making bullion more expensive for holders of other currencies.

Oil-driven inflation fears and delayed rate-cut expectations likely strengthened U.S. yields and the dollar, outweighing safe-haven demand and pushing gold down.

ALUMINIUM JUMPS ON SUPPLY DISRUPTIONS

Aluminium soared to its highest in four years as ⁠supply concerns ​due to the Middle East war intensified.

Benchmark three-month aluminium on the London ​Metal Exchange hit its highest since March 2022 at $3,544 per ton.

Qatari smelter Qatalum and Aluminium Bahrain have already declared force majeure on shipments amid rising ​tensions in the Middle East.

Other base metals were weighed down by a firmer dollar. (Reuters)

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