Gold: Analysts Warn Middle East Crisis Unlikely to Spark a New Rally

Quick overview

The gold market’s reaction to the escalating conflict between Israel and Iran remains very muted.

The escalating tensions between Israel and Iran have had only a limited impact on gold prices, and a sustained rally appears unlikely without broader economic repercussions, according to the experts.

Since Israel’s initial attacks, the price of gold has risen less than 1%—a move they attribute largely to “speculators and automated trading systems in the futures market, rather than physical safe-haven demand.”

While geopolitical tensions typically lead to short-term spikes in gold, history shows that such moves rarely last unless there is significant economic disruption. “Departures from this pattern have only occurred when conflicts had a meaningful economic impact,” the analysts noted, citing the second oil crisis in 1979–1980 as a rare exception.

Currently, the risk of supply disruptions—such as a shutdown of the Strait of Hormuz—is considered very low.

Other Variables to Consider

The response from both nations’ allies has also been measured, reducing the likelihood of a broader regional escalation. Still, Julius Baer sees the conflict as a supportive factor for gold’s longer-term bullish outlook.

Safe-haven demand is expected to remain strong amid ongoing economic and political uncertainties. In addition, central bank gold purchases are projected to stay robust as countries seek to reduce their dependence on the U.S. dollar.

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Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

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