Gold Falls 3.5% as Oil Dominates Crisis Narrative Above $90 a Barrel

In one of the more surprising market reactions to the week’s events, gold fell approximately 3.5% during a week in which oil surged past $90 a barrel and global financial markets recorded their worst performance in years. The precious metal, typically a reliable haven for investors in times of geopolitical stress, dropped to below $5,100 an ounce as investors appeared to prefer cash and dollar assets over gold during the Iran crisis.
The flight to the US dollar rather than gold may reflect the specific nature of this crisis. As an energy shock driven by a Middle East conflict, the immediate financial pressure falls most heavily on oil-importing nations, whose currencies typically weaken against the dollar when oil prices rise. This dynamic strengthens the dollar and reduces the relative attractiveness of gold, which is priced in dollars and typically rises when the greenback weakens.
While gold fell, oil told a very different story. Brent crude surged from around $72.50 to $91.89 in a single week — a more than 25% gain that represents the biggest weekly move in oil since the early Covid-19 pandemic. The surge was driven by the Iran conflict, which has disrupted tanker traffic through the Strait of Hormuz, created a storage crisis across the Gulf, and raised the prospect of coordinated production cuts by major exporters.
The oil price move has had consequences across the financial system. UK and eurozone bond yields surged to multi-year highs, interest rate cut expectations were abandoned, and stock markets fell sharply. Airlines suffered the biggest corporate losses of the week, with IAG falling more than 12% and Wizz Air losing nearly a fifth of its value. Qatar’s energy minister warned that continued conflict could push oil to $150 a barrel.
Economists are now wrestling with the implications of a sustained energy price shock for global inflation. The last major oil price surge, in the post-Covid period, contributed to the most severe bout of global inflation in decades. Should the current crisis persist — or worsen, as Qatar’s minister warns it might — the economic consequences could be similarly severe, with particular pain for economies that had been counting on interest rate cuts to stimulate growth.