Gold prices jumped more than 2% on Monday, reaching their highest level in nearly a week, after the United States and Iran announced an initial framework agreement to end their conflict, reopen the Strait of Hormuz, and lift the U.S. blockade on Iran.

Gold prices surged more than 2% on Monday, climbing to their highest level in nearly a week as financial markets reacted to a landmark diplomatic breakthrough between the United States and Iran that could bring an end to months of conflict and reopen one of the world's most critical energy corridors.

Spot gold jumped 2.5% to $4,323.29 per ounce by 0536 GMT, extending gains for a third straight session. U.S. gold futures for August delivery advanced by a similar margin to $4,343.80, while silver, platinum and palladium also rallied sharply.

The gains followed Sunday's announcement by U.S. and Iranian officials that they had reached a preliminary framework agreement aimed at ending hostilities, reopening the Strait of Hormuz and lifting the U.S. blockade on Iran.

Pakistani Prime Minister Shehbaz Sharif said the agreement will be formally signed in Switzerland on Friday following intensive mediation efforts, describing the accord as a major step toward restoring regional stability.

The diplomatic breakthrough triggered an immediate reaction across global commodity markets.

Brent crude prices fell more than 4%, retreating toward the $84-per-barrel mark as traders priced in the expected reopening of the Strait of Hormuz — the narrow maritime chokepoint through which roughly one-fifth of global oil shipments pass.

The U.S. dollar simultaneously weakened to a 10-day low against major currencies, boosting the attractiveness of dollar-denominated gold for overseas investors.

"Lower oil prices and a softer dollar, stemming from reduced geopolitical risk and the anticipated reopening of the Strait of Hormuz, are helping to calm inflation expectations," said Tim Waterer, chief market analyst at KCM Trade.

"This combination is providing the precious metal with its best tailwind in recent weeks."

The decline in oil prices has also eased fears that prolonged disruptions to global energy supplies would reignite inflation pressures and force central banks to maintain tighter monetary policies for longer.

Gold had fallen nearly 20% since the outbreak of the U.S.-Israeli military campaign against Iran in late February, as soaring energy prices and inflation concerns led investors to anticipate higher interest rates.

However, with the immediate threat to oil supplies appearing to diminish, markets are reassessing the trajectory of U.S. monetary policy.

Analysts say that lower energy costs could grant central banks greater flexibility in addressing slowing growth without reigniting inflation.

Diplomatic sources indicate that the initial agreement includes an immediate ceasefire, the phased reopening of the Strait of Hormuz under international monitoring, and the gradual easing of sanctions imposed on Tehran.

A proposed 60-day negotiating period is also expected to pave the way for broader talks addressing Iran's nuclear program, sanctions relief and regional security arrangements. European and Chinese representatives are reportedly expected to attend the signing ceremony in Switzerland later this week, while U.S. Vice President JD Vance has said he plans to be present and that President Donald Trump could also attend if logistics permit.

Despite the positive market reaction, analysts caution that the agreement remains a preliminary framework whose success will depend on implementation by all parties involved.

Several contentious issues — including the future of Iran's nuclear activities, enforcement mechanisms and the participation of regional actors not directly involved in the negotiations — remain unresolved. Any setbacks could quickly revive safe-haven demand and reverse recent market trends.

For now, however, investors are embracing the prospect of de-escalation.

As trading continued Monday, gold remained firmly above the $4,300 threshold, with markets awaiting both the Federal Reserve's policy announcement and Friday's Switzerland signing ceremony for clues on the next direction of precious metals, energy prices and the broader global economy. (ILKHA)