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Gold surged toward record territory on Monday as oil and gas prices spiked and global equities fell amid a dramatic escalation in the Middle East. Yet despite the scale of the shock, bullion’s gains lagged the explosive move in energy markets, underscoring how investors are balancing safe-haven demand against a surging US dollar and shifting interest-rate expectations.
The weekend’s joint US-Israeli strikes on Iran, dubbed Operation Epic Fury, targeted nuclear and military facilities and reportedly killed Iran’s Supreme Leader, Ayatollah Ali Khamenei. Tehran retaliated with drone and missile attacks on Israel and on 27 airbases hosting US forces across Kuwait, the UAE and Oman. Iran also struck Saudi Arabia’s Ras Tanura refinery, prompting Saudi Aramco to halt operations, while Qatar, the world’s third-largest LNG exporter, suspended gas production. For a region long accustomed to proxy tensions, this marked a direct and broad confrontation, sending immediate shockwaves through commodity and financial markets.
Crude prices leapt as much as 9% overnight, pushing Brent above $80 per barrel at one stage, an eight-month high and the biggest daily jump since the post-pandemic energy crisis of 2022. European natural gas prices soared nearly 47% on the Dutch TTF futures contract. The catalyst was not just retaliation, but fear over the Strait of Hormuz, the narrow waterway through which roughly 20% of global oil consumption passes. Iran initially declared the strait closed, then reversed course. Yet, attacks on tankers and surging insurance costs effectively choked shipping flows.“This is about Hormuz risk, not retaliation,” one analyst told Bloomberg. “If shipping stays open, markets can work through it. If it doesn’t, all bets are off.”
The reaction came despite OPEC+ agreeing over the weekend to raise output from April, a move overshadowed by the immediate threat to physical supply. Historical precedent highlights why energy markets are so sensitive. During the 1973–74 Arab oil embargo, US crude prices rose more than 90%, while gold climbed nearly 140%. During the 1979–80 Iranian Revolution, oil surged more than 110% and gold jumped almost 150%, marking its largest two-year percentage gain on record. So far, oil’s move has outpaced gold’s.
Gold in London jumped as much as 2.7% to $5,418 per ounce on Monday, briefly trading within 3% of January’s all-time high above $5,600. However, the metal quickly gave back part of those gains, slipping toward $5,300 as the US dollar strengthened and profit-taking set in. Earlier in the year, gold had already recorded its first full week above $5,000 per ounce, partly pricing in geopolitical risk. Analysts said that positioning may have tempered the initial upside.“I think you’re going to see a knee-jerk spike in most commodities, including gold and oil,” said Edward Meir of Marex. “But markets are dispassionate about military conflict. The key question is whether oil flows are interrupted.”
Hugo Pascal, a precious metals trader, noted that tokenized gold traded at a weekend premium, signaling a “flight to safety” ahead of traditional exchanges reopening. Still, he cautioned that such premiums often exaggerate the initial gap.
By midday in New York, April gold futures were up around $65 at $5,311, well below overnight highs. Silver, which had initially rallied nearly 3%, reversed sharply lower as equities stabilized and the dollar climbed.
The US Dollar Index rose 0.7% to a five-week high, limiting gold’s upside. Rising energy prices fueled inflation concerns, prompting traders to scale back expectations for interest-rate cuts in the US, UK and Eurozone. Swaps markets slashed the probability of three Federal Reserve rate cuts in 2026 to 20%, down from nearly 50% last week. Expectations for easing from the Bank of England and European Central Bank were similarly reduced. Two-year bond yields, most sensitive to monetary policy, rose sharply.
Higher yields and a stronger dollar typically weigh on gold by increasing the opportunity cost of holding non-yielding assets.“Gold’s gains could be capped by a potential rebound in the US dollar, especially if crude stays sharply higher,” said Fawad Razaqzada of City Index. Still, many analysts expect safe-haven demand to persist. “Given the risks regarding how long the conflict may last and inflation fears, gold is expected to assume its mantle as the safe-haven asset of choice,” said Tim Waterer of KCM Trade. Ole Hansen of Saxo Bank added: “I would not be surprised if gold prints a fresh record high.”
Beyond commodities, the conflict has struck at the heart of the Gulf’s economic model, particularly Dubai’s long-cultivated image as a stable oasis in a volatile region. Iranian retaliatory strikes hit near key infrastructure in the UAE, including Dubai International Airport and facilities at Jebel Ali Port. While authorities said the situation was under control, the psychological impact was profound. UAE stock exchanges suspended trading for two days, an unprecedented move, and airspace closures stranded tens of thousands.“For decades, Dubai promised that conflicts stopped at its borders,” said Jim Krane of Rice University. “That assumption is now in doubt.”
Dubai’s economy, powered by trade, tourism, real estate and financial services rather than oil, has thrived on perceptions of safety and neutrality. Its population has swelled to 11 million across the UAE, bolstered by waves of expatriates and capital fleeing instability elsewhere. Now, investors are reassessing. A UAE-based investment firm has reportedly halted fundraising and begun contingency planning. Demand for physical gold bars has surged. Private banks expanding in the Dubai International Financial Centre may reconsider the scale of their operations.“The longer the war continues, the more intense the search will be for alternative locations,” Krane warned. “International capital is highly mobile.”For now, markets are reacting to headlines and energy flows. Oil has taken the lead, reflecting immediate supply risk. Gold has responded, but more cautiously, constrained by dollar strength and shifting rate expectations.
History suggests that prolonged energy disruption could amplify bullion’s appeal, particularly if inflation accelerates and central banks hesitate to ease policy. Conversely, if shipping through Hormuz resumes smoothly and the conflict remains contained, the initial spike in commodities may fade.
“There will be extra haven demand for gold,” said Razaqzada. “But the extent of the move will depend on the energy market and how long this lasts.”In other words, gold’s next move may hinge less on missiles and more on tankers.