Gold prices plunged on Monday as geopolitical tensions between the United States and Iran reignited. Spot gold fell 2.9% to settle at $4,001.13 per ounce, while gold futures slipped 2.6% to $4,008.65 per ounce. The dollar‑linked gold index (GC) edged up 0.02% and the spot gold price in U.S. dollars rose 0.04% before the broader decline.
The backdrop to the metal sell‑off was a sharp escalation in the U.S.-Iran conflict. After a brief cease‑fire collapsed, both sides exchanged fresh strikes, prompting President Donald Trump to announce the reinstatement of a naval blockade of the Strait of Hormuz. Trump stated on Truth Social that the strait would remain open for all nations except Iran and that the United States would be reimbursed at a rate of 20% on all cargo shipped for security costs. Iran’s state media countered by saying it had closed the strait until stability was restored and U.S. interference ceased. U.S. Central Command reported completing four rounds of strikes against Iranian targets during the week, while maintaining that the narrow chokepoint remained open.
The renewed fighting revived the geopolitical risk premium, sending crude oil prices sharply higher. West Texas Intermediate (WTI) rose 9.62% on the day, extending the surge that began after the latest round of hostilities reduced ship transits through the Hormuz Strait. Traders responded by raising expectations of tighter U.S. monetary policy. The CME FedWatch tool indicated the probability of a quarter‑point Federal Reserve rate hike at the July‑end meeting increased to roughly 43%, up from about 34% the previous day.
Market participants are now focused on upcoming U.S. consumer‑price and producer‑price inflation releases. While analysts had anticipated easing price pressures in June following a prior decline in oil prices, the sudden spike in crude has shifted expectations. The Federal Reserve, in its semi‑annual monetary policy report submitted to the Senate Banking Committee and the House Financial Services Committee, reiterated its commitment to price stability and signaled readiness to act forcefully to curb longer‑term inflation expectations. New Fed Chair Kevin Warsh is scheduled to testify before both committees next week.
Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management, commented that markets view the recent inflation surge as largely tied to the energy price spike from the Middle‑East conflict, but he warned that inflation could remain sticky even if oil prices stabilize. The article concludes with contributions from Roushni Nair, Vahid Karaahmetovic, and Jaiveer Shekhawat.