Gold (GC=F) opened the week under swift pressure, sliding as much as 1.9% and falling below $4,740 an ounce to wipe out all of last week's gains in a single session. The immediate trigger: fresh attacks on vessels in the Strait of Hormuz over the weekend, followed by President Trump’s confirmation that U.S. Navy forces fired upon and seized an Iranian-flagged cargo ship. After more than seven weeks of conflict, markets remain on edge with headlines quickly reversing what was, only Friday, a rare moment of calm when Tehran declared the strait “completely open.”
Hormuz Tensions and the Gold Market’s Sharp Turn
By Sunday, following new strikes in the strait, ships—including cruise vessels that had briefly re-entered the Persian Gulf—were scrambling to exit, reflecting just how fragile any appearance of normalcy has been. US President Trump said he saw a chance for a deal in Islamabad this week while at the same time threatening action against Iranian infrastructure. Tehran, meanwhile, countered that there was no "clear prospect" for negotiations. This tense back-and-forth underscores the risk that peace efforts could collapse on any fresh escalation.
Energy markets reacted strongly: oil and natural gas prices soared Monday after slumping Friday, amplifying fears of an inflationary burst. The dollar index climbed as much as 0.3%, further weighing on dollar-denominated gold. US equity futures slipped. Kyle Rodda, analyst at Capital.com, captured the mood: "The war trades are back on, and that means gold is being sold." The logic, according to market observers, is not the simplistic "safe haven" move, but the impact of inflation on central bank rate expectations.
Stocks365 Take: Central Banks, Not Safe-Haven Flows, Drive Bullion
The protracted conflict in the Middle East has created repeated energy supply shocks, which in turn have fueled inflation. In this context, central banks are seen as unlikely to cut interest rates as long as inflation stays elevated—a clear headwind for non-yielding assets like gold. Bullion has now lost around 10% since the start of the conflict at the end of February, according to Bloomberg. This is shaping up to be a regime shift: where gold was the consensus safe-haven earlier, the rate backdrop is now critical, with traders watching every headline from both the Gulf and the Fed.
Why This Geopolitical Standoff Feels Like the Tanker War, Not 1973
While the Hormuz shock draws quick analogies to the energy embargo of 1973, a closer historical parallel may be the 1987–1988 Tanker War. Then, disruptions were severe but intermittent, and gold prices did not explode higher—largely because real rates were high enough to outweigh inflation fear. What’s new this time: direct US military involvement, including the reported seizure of an Iranian vessel, adds to the geopolitical premium and could escalate the conflict further if diplomacy fails. In the background, bullion’s recent 10% drop suggests markets may be pricing in the risk of sustained turmoil, though any breakthrough in Islamabad could quickly reverse that.
Ceasefire Deadline and Fed Policy—What to Watch This Week
The main catalyst now is Tuesday’s scheduled end to the ceasefire. If a diplomatic breakthrough emerges, expect a reversal in the dollar and a rebound in gold. Failure to extend the ceasefire could see oil hold its gains and gold drift lower. Meanwhile, investors are also tracking the US Senate confirmation hearing for Kevin Warsh, President Trump’s pick to lead the Federal Reserve, where any pivot on inflation or rate policy would have knock-on effects for gold and other assets. The market remains headline-driven and highly sensitive to both geopolitical and policy outcomes in the days ahead.