Gold and Oil Prices Surge as Middle East Tensions Escalate
A fresh wave of geopolitical turmoil in the Middle East has jolted global markets, sending gold and oil prices soaring while equities sink under the weight of rising uncertainty.
Israel-Iran Conflict Sparks Market Volatility
Markets were shaken after Israel launched pre-emptive strikes against Iranian targets, prompting a swift and heavy retaliation from Tehran, which reportedly unleashed 100 drones in response. The escalation has reignited fears of wider regional conflict, particularly given the Middle East's central role in global energy supply.
As expected in such crises, investors quickly pivoted to safe haven assets like gold and the Swiss franc. Gold prices jumped 1.5%, climbing to $3,434 per ounce—just shy of the record $3,500 set in April. With tensions unlikely to subside in the near term, many analysts believe gold may soon retest that all-time high.
Oil Prices Surge on Supply Disruption Fears
Brent crude surged over 10% at the peak of the panic, eventually settling around $73.12 a barrel—still up 5.5% on the day and marking the biggest daily gain since 2022. The market is bracing for potential disruptions to oil shipments through the Strait of Hormuz, a key maritime chokepoint handling around 20% of global oil and a significant share of liquified natural gas.
Energy stocks rallied on the news, with BP and Shell each gaining 2%. Defence stocks also saw an uptick, as BAE Systems rose nearly 3% amid rising demand expectations. Meanwhile, airline stocks slumped—British Airways owner IAG and easyJet each dropped more than 4% as carriers diverted air traffic from the conflict zone.
Flight to Safety Hits Global Equities
The ripple effect extended to global stock markets, with sharp declines recorded across Asia and Europe. The FTSE 100 opened 50 points lower, paring back gains after Thursday’s record high. European indices across Germany, France, Italy, and Spain all fell over 1%, while futures indicated Wall Street would follow suit.
Investors are clearly repositioning, moving away from risk and into safe havens. The yield on 10-year US Treasuries dropped to a one-month low of 4.31%, while the US dollar strengthened against the euro and sterling. Currency markets also saw safe-haven inflows to the yen and Swiss franc.
Outlook: Gold Set to Shine Amid Deepening Global Risks
Analysts warn that the combination of escalating military conflict, threats to energy supply chains, and existing economic uncertainty—including trade disputes and potential Fed policy shifts—create a volatile backdrop likely to sustain gold’s appeal.
“Gold prices are heading towards record highs, equities are under pressure, and the dollar is rising once again,” said Jochen Stanzl of CMC Markets. “The events of the past few hours have sparked a broad risk-off movement among investors.”
Key Takeaways for Investors
Gold Outlook: Bullish. Price nears all-time highs as geopolitical tensions escalate.
Oil Impact: Potential for further gains if Hormuz shipping lanes are disrupted.
Equity Pressure: Continued risk aversion could weigh on global indices.
Safe Haven Demand: Expect further inflows into gold, Swiss franc, yen, and Treasuries.
Bottom Line: With conflict intensifying and risk sentiment deteriorating, gold continues to prove its worth as the quintessential safe haven asset. Investors would be wise to keep a close eye on developments in the Middle East, which may dictate not only commodity prices but the broader direction of global markets in the weeks ahead.
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