Gold falls as US-Iran strikes boost oil prices, Fed rate hike expected

Gold prices fell to $4,118.71 per ounce, registering a 0.10% decline as renewed U.S.-Iran strikes impacted Middle East energy supply, causing a surge in oil prices. Brent crude rose nearly 8% to $79 per barrel, given fears of extended hostilities and disruptions in the Strait of Hormuz, which accounts for a significant portion of global oil and LNG supply. The inflationary pressures stemming from the conflict have reinforced expectations that the Federal Reserve might maintain a hawkish stance on interest rates, with a potential rate hike by October under Chair Kevin Warsh. This development places additional pressure on gold, which offers no yield, as it faces competition from interest-bearing assets like Treasuries.

Key Takeaways

• Gold’s decline appears connected to heightened inflation risks due to Middle East tensions and hawkish Federal Reserve expectations.
• Pricing in Fed rate cut markets suggests a lower likelihood of cuts in 2026, consistent with a hawkish Fed stance.
• Gold markets reflect a lack of confidence in reaching higher price targets, with current indicators showing limited support for significant price increases.

What to Watch

The Federal Reserve’s upcoming meetings will be crucial in shaping expectations for interest rate decisions, especially given the current geopolitical tensions. Observers will focus on any shifts in the Federal Reserve’s language or policy direction that could influence inflation expectations and interest rate forecasts. Additionally, developments in the U.S.-Iran conflict could further impact energy prices and inflation, affecting both gold and broader market dynamics. Markets appear to be anticipating further updates regarding any potential peace agreements or escalations in the Middle East, which could significantly shift current pricing expectations.

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Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.