Gold traded around $4,030 an ounce on Monday as investors weighed the escalating US–Iran conflict and its potential impact on oil prices, inflation, and monetary policy. US forces continued to strike Iranian targets, while worries over shipping through the Strait of Hormuz intensified after Tehran reported that two oil tankers had exploded and become disabled.
Oil prices, which had earlier climbed to their highest level in more than a month, later pulled back after Iran’s foreign ministry signaled that talks with the US remained possible, provided they were consistent with Iran’s national interests. Nonetheless, elevated energy costs are still stoking inflation fears and strengthening expectations that US interest rates will stay higher for longer.
At the same time, Cleveland Fed President Beth Hammack added her voice to a growing group of policymakers indicating that additional rate increases may be required to tame stubborn inflation. Futures markets now assign an 80% probability to a Federal Reserve rate hike in December, up from 73% just a week earlier.