How Hormuz Diplomatic Progress Reshaped Markets on August 5, 2026: Gold Surge, Oil Crash, and Fed Rate Odds in Focus

Silver followed closely. Spot silver rose roughly 4.16% to $61.88 an ounce , while Comex silver futures hit $63 an ounce . Other sources recorded silver prices in the $59.80–$61.88 range, representing gains of 3–5% . The rally was driven by lower US Treasury yields and the growing hope that a deal to reopen the Strait of Hormuz would cap oil-driven inflation, reducing the pressure on the Federal Reserve to tighten monetary policy .

The Strait of Hormuz situation was described by analysts as "the main geopolitical variable for gold, oil and risk assets" . With Iran and Oman agreeing on the coordinates of a proposed shipping route, and US officials signaling that an interim deal could be close, traders piled into precious metals as a safe haven that also benefited from the disinflationary signal .

Oil Prices Crash Below $80

The diplomatic signals hit oil markets particularly hard. On August 5, Brent crude fell approximately 5.3% to $79.36 a barrel, and West Texas Intermediate (WTI) dropped about 5.7% to $75.77, as hopes for a Hormuz deal mounted . These declines extended a sharp selloff that had already seen oil plunge over 7% earlier in the week to three-week lows after President Trump called off a planned attack on Iran .

Oil prices had been above $100 at the height of the US-Iran war but slid below $80 following diplomatic signals . Prices partially recovered later on August 5 after Houthi rebels in Yemen claimed an attack on a Saudi tanker in the Red Sea, with Brent bouncing back to $80.32, up 1.2% . The Houthi attack served as a stark reminder that regional spoilers could disrupt supply — even if a broader US-Iran deal is reached.

Federal Reserve Rate Expectations Pull Back Sharply

The market's reassessment of inflation risk had an immediate effect on Federal Reserve rate expectations. As of August 5, the probability of a September Fed rate hike had fallen sharply to 58.4%, according to CME FedWatch data . That was a dramatic drop from 82.4% in late July, when elevated oil prices and persistent inflation had made a September hike seem nearly certain . The chance of no change in September rose to 41.6% .

Interest-rate-sensitive two-year US Treasury yields fell to a two-week low as traders scaled back rate-hike bets . The oil price decline directly dampened inflation expectations and reduced the urgency for the Fed to tighten in September . A separate Polymarket prediction market showed traders' probability estimate for a 25-basis-point rate hike in September had dropped to 48% .

Analysts' Outlook: Disinflationary Catalyst — With Caution

While specific forecasts from Jefferies, CITIC Securities, and Citi for August 5 were not surfaced in the available sources, the broader market narrative was consistent. Analysts widely viewed a Hormuz reopening deal as a significant disinflationary catalyst that would ease oil supply bottlenecks, lower inflation pressure, and allow the Fed more flexibility to hold rates steady — a net positive for risk assets and gold .

Markets were described as "torn between Hormuz optimism and Fed caution," with silver "holding above $60 as falling oil and lower Treasury yields offset Fed uncertainty" . The rally in precious metals was framed as both a safe-haven bid and a yields-driven move, with the Strait of Hormuz situation cited as the primary geopolitical variable .

Remaining Risks: Tehran Silence, Trump Ultimatum, and Spoilers

Despite the bullish price action, the market remained in a cautious "hope but not certainty" posture. Several key risks stood out:

1. Tehran's lack of confirmation. Iran continued to deny any direct negotiations with the United States, creating a credibility gap between US officials' optimism and Tehran's statements . No final agreement had been reached, despite progress on technical route coordinates with Oman . Iran's foreign minister insisted the waterway would "never return to its pre-war status" .

2. Trump's military ultimatum. President Trump warned that the Strait would open "very shortly" or Iran would face "harsh consequences," keeping the risk of renewed military escalation alive . "If they withdraw again, they will be hit extremely hard," Trump stated .

3. Houthi attacks. On August 5, Yemen's Houthi rebels claimed an attack on a Saudi tanker in the Red Sea, driving a partial oil price recovery . The Houthis, who are backed by Iran, have repeatedly demonstrated their ability to disrupt shipping even without direct Iranian involvement.

4. No final agreement. Qatar's foreign ministry confirmed talks were "ongoing" but no deal was finalized . Qatar's spokesperson said negotiations were focused on "a short-term resolution that would help us reignite the talks" .

5. Upcoming US jobs data. Markets remained focused on upcoming US employment figures, which could shift Fed rate expectations again regardless of Hormuz developments .

The Bottom Line

Hormuz diplomatic progress on August 5 was a powerful disinflationary signal that reshaped three interconnected markets in a single day: gold and silver rallied sharply, oil prices crashed, and September Fed rate hike odds were cut from ~82% to ~58%. But with Tehran not yet confirming a deal, Trump's military threat still on the table, Houthi disruptions, and key US jobs data ahead, the market's relief rally remained conditional. The Strait of Hormuz situation was — and remains — the main geopolitical variable for gold, oil, and risk assets .