The gold price is down almost 10% since the outbreak of the Iran war. The rising geopolitical risks in the Middle East failed to boost the demand for safe-haven assets as gold continued to languish around $4,800 in the last 20 days. Over the last 30 days, gold has been up 10% after falling to a low of $4,380 and has gained nearly 40% in the last 1 year. However, the road ahead looks bumpy for the gold investors.

Primarily, the rise in gold prices is driven by news related to Trump’s statements on the Iran war and the responses from the Iranian regime.

The Iran War

Gold fell over 1% to under $4,800 per ounce on Monday, reversing last week’s gains amid escalating tensions in the Strait of Hormuz, which pushed oil prices higher and heightened inflation fears.

In a recent incident, President Donald Trump announced that the US Navy fired upon and seized an Iranian cargo vessel in the Gulf of Oman for failing to heed warnings while leaving Hormuz. In response, Tehran targeted ships and reaffirmed its control over the Strait, contending that the US blockade on Iran-related vessels infringed upon the ceasefire agreement.

However, Trump suggested that a deal might still be possible before upcoming talks in Pakistan, while Iran remains skeptical about the likelihood of reaching an agreement.

ALSO READ

Oil Prices

Brent crude futures gained over 5% to surpass $95 per barrel on Monday, recovering losses from the prior session amid renewed geopolitical tensions in the Middle East. The prolonged Middle East conflict has resulted in a significant energy supply shock. Although oil prices have fallen by 5% in the last month, they are still up by 25% since the war began.

US Fed Rates

One of the biggest casualties of high oil prices is inflationary pressure on goods, services and borrowing costs. CME FedWatch shows a high probability of the US central bank keeping rates unchanged at 3.5%-3.75%, all through 2026. The US Fed had kept interest rates unchanged at the March FOMC meeting and cautioned about rising inflation, presenting challenges for gold due to a prolonged period of higher rates. A falling rate scenario boosts gold prices and vice versa.

US Dollar Index

The dollar index, which measures the performance of the dollar against a basket of currencies, increased to approximately 98.3 on Monday, regaining some of last week’s losses due to heightened US-Iran tensions that boosted demand for the safe-haven currency.

Stagflation Concerns

Will there be a stagflation scenario, marked with high inflation and falling growth? The International Monetary Fund has reduced its 2026 global growth forecast to 3.1%, down from 3.3% projected in January, citing the oil-price shock stemming from the conflict in the Middle East. Additionally, the IMF has raised its inflation estimate due to increased energy and food prices.

The U.S. Commerce Department has revised the fourth-quarter 2025 GDP growth down to 0.7 percent, a decrease from the initial estimate of 1.4 percent and significantly lower than the growth rates of 4.4 percent in the third quarter and 3.8 percent in the second quarter of 2025.

Disclaimer: This article is intended for informational purposes only and should not be construed as investment advice, financial guidance, or a recommendation to buy or sell any asset. Gold prices are subject to market volatility and may rise or fall without notice. Past performance is not indicative of future returns.