Gold, often viewed as a safe-haven asset during global uncertainty, came under pressure despite ongoing conflict risks. Spot gold fell 0.9% to $4,529.50 per ounce as of 0545 GMT, while U.S. gold futures for June delivery inched up slightly by 0.2% to $4,529.60, reflecting a mixed and uncertain market tone.
At the center of the latest market jitters are escalating tensions following U.S. strikes described by Washington as “defensive” actions in southern Iran. U.S. Secretary of State Marco Rubio indicated that diplomatic negotiations remain distant, saying a potential deal with Iran could “take a few days,” effectively dampening hopes for a swift de-escalation.
Market analysts warn that the situation may have longer-lasting economic consequences than initially expected.
“Even though we have a peace deal that is being done and dusted between the U.S. and Iran, the damage that has been done to Middle East oil production facilities could actually prevent a rapid normalisation of oil flows flowing into the rest of the world from the Middle East,” said Kelvin Wong, a senior market analyst at OANDA.
He added that markets are already adjusting expectations around monetary policy: “The market has started to price in this situation, showing very high odds of an interest rate hike to come in this year.”
Oil Rally Keeps Inflation Narrative in Focus
The energy market responded sharply, with Brent crude futures rising about 2% in Asian trading. Traders remain cautious as prospects for an agreement to stabilize the region—or reopen key shipping routes like the Strait of Hormuz—remain uncertain.
Higher oil prices tend to feed directly into inflation, complicating central bank decisions. While gold is typically supported by inflationary pressures, it becomes less attractive when interest rates are expected to stay elevated or rise further, since it does not yield interest.
Fed Expectations Shift Toward Possible Rate Hike
Investor sentiment is increasingly leaning toward tighter monetary policy. According to CME Group’s FedWatch tool, markets are now pricing in a 56% probability of a U.S. Federal Reserve rate hike by December, reflecting growing concern that energy-driven inflation could persist longer than expected.
Precious Metals Broader Weakness
Other metals also declined alongside gold. Silver dropped 2.1% to $76.45 per ounce, while Platinum slipped 1% to $1,948.12 and Palladium fell 1.4% to $1,378.89.
Market Mood: Inflation Fears vs Safe-Haven Demand
The mixed price action highlights a tug-of-war in global markets: geopolitical risk is boosting energy prices and inflation expectations, while simultaneously undermining the appeal of non-yielding assets like gold due to the prospect of higher interest rates.
For now, traders appear focused less on safe-haven demand and more on how sustained oil disruptions could reshape central bank policy in the months ahead.