FX.co ★ Gold Dips as Middle East Tensions Lift Oil, Weigh on Rate-Cut Bets

Gold prices slipped to around $5,100 per ounce on Monday morning, pressured by a stronger US dollar and fading expectations of imminent Federal Reserve rate cuts, which outweighed safe-haven demand stemming from the escalating conflict in the Middle East. At the same time, oil prices surged above $100 per barrel for the first time since 2022 as the war with Iran entered its second week, heightening fears of a renewed bout of global inflation.

Market disruptions intensified after oil tankers were effectively prevented from transiting the Strait of Hormuz, prompting several key Middle Eastern producers—including Kuwait, Iraq, and the UAE—to curtail crude output. The conflict has already disrupted roughly one-fifth of global crude oil and natural gas supply, as Iran continues to target vessels in this critical shipping corridor.

The sharp rise in energy prices risks complicating the Federal Reserve’s policy outlook, bolstering expectations that rate cuts will be postponed and raising the threat of stagflation, particularly in light of last week’s weaker-than-expected US jobs report.