Gold Trading Alert: The escalating conflict in the Middle East fuels safe-haven demand, pushing gold prices sharply above $5300 and potentially setting a new all-time high.
2026-03-03 07:42:07
The global gold market experienced significant volatility on Monday (March 2). Following the US and Israel's military strikes against Iran, geopolitical risks in the Middle East escalated sharply, leading to a surge of safe-haven funds into the gold market. This pushed spot gold prices above $5,400, reaching a high of $5,419.01 before closing at $5,321.97, a 0.3% increase from the previous trading day. Year-to-date, gold has risen by 23%, continuing its impressive 64% upward trend projected for 2025. On Tuesday (March 3), spot gold fluctuated at high levels in early Asian trading, currently trading around $5,332.87 per ounce. The conflict between the US, Israel, and Iran has spread to Lebanon, and US media reports indicate that the US is preparing for a "large-scale attack" on Iran within the next 24 hours. Gold prices are expected to continue their upward trend in the short term, although a surge in US and Treasury yields has somewhat limited the gains.
The current situation in the Middle East is at its most dangerous juncture in decades. Following the US-Israeli airstrikes against Iran, the conflict has not only failed to be contained but has spread outwards at an alarming rate. The death of Iran's Supreme Leader Ayatollah Khamenei in the attack marked a turning point in the rapidly deteriorating situation. In response, Hezbollah, backed by Iran, launched missiles and drones at Israel, prompting a massive Israeli airstrike on the southern suburbs of Beirut, killing at least 31 people and injuring 149. Simultaneously, the Iranian Revolutionary Guard claimed responsibility for attacking a US military base in Kuwait, destroying 10 drones. The conflict has even spread to Cyprus, with a missile striking the Royal Air Force's Akrotiri base in the UK.
In an interview, US President Trump stated that military operations could last for weeks and warned that "a much larger offensive is yet to come." US Central Command confirmed that six US personnel have been killed in the conflict, and the accidental downing of three US F-15E fighter jets by Kuwait further highlighted the chaos on the battlefield. The US State Department has urged US citizens in 14 Middle Eastern countries to immediately evacuate via commercial channels, citing "serious security risks."
For the gold market, geopolitical risk has always been one of the core driving factors. The current conflict has exceeded previous market expectations in both breadth and depth, extending from Iran to Lebanon, Kuwait, and Cyprus, showing a comprehensive spread. David Meger, Director of Metals Trading at High Ridge Futures, pointed out, "The market is currently trying to determine whether there will be further blows in the coming weeks, and it is this uncertainty that is supporting gold prices." Until the situation becomes clearer, safe-haven demand will continue to provide upward momentum for gold.
Amid escalating conflict following the US-Israel attack on Iran, the US State Department urged Americans in more than a dozen Middle Eastern countries to leave via commercial routes, citing “serious security risks.” The State Department stated on Monday that Americans should leave Bahrain, Egypt, Iran, Iraq, Israel, the West Bank and Gaza, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates, and Yemen. US Secretary of State Marco Rubio stated on Monday that “the heaviest blows from the US military are yet to come,” while an Iranian commander threatened to attack ships transiting the Strait of Hormuz.
The impact of the Middle East conflict on global energy markets is rapidly becoming apparent. Iranian commanders have publicly threatened to attack any ships attempting to cross the Strait of Hormuz, the world's most vital oil shipping route, which carries approximately one-fifth of the world's daily seaborne crude oil trade. According to data from Lloyd's List Intelligence, ship traffic through the strait has decreased by more than 80% since the start of the military operation, with only one crude oil tanker passing through on Sunday.
Oil prices surged in response, with U.S. crude futures rising as much as 12% intraday on Monday before closing up 6.28% at $71.23 a barrel; Brent crude rose 6.68% to $77.74 a barrel. Qatar has suspended liquefied natural gas production, and several oil and gas facilities in the Middle East have implemented preventative shutdowns, further exacerbating supply-side uncertainty.
The rapid rise in oil prices is spreading to broader economic sectors. The US ISM Manufacturing Purchasing Managers' Index for February showed that input prices jumped to 70.5 from 59.0 in January, reaching their highest level since June 2022. It's worth noting that this data reflects pre-war conditions, and inflationary pressures are expected to intensify further in the coming months. For gold, rising inflation expectations are generally beneficial, especially against the backdrop of economic growth pressures, where gold's safe-haven status against inflation will become even more prominent.
The rapid rise in inflation expectations is reshaping market expectations for the Federal Reserve's monetary policy. The CME FedWatch tool shows that market expectations for a June rate cut by the Fed have fallen from 57.4% before the conflict to 45.2%. The U.S. Treasury market reacted more directly, with the two-year Treasury yield surging 11.1 basis points to 3.49%, the largest single-day increase since June of last year; the ten-year Treasury yield rose 8.6 basis points to 4.048%.
From the perspective of gold pricing logic, while rising nominal interest rates certainly exert downward pressure, the increase in inflation expectations is even greater, pushing real interest rates lower. The break-even yield on five-year US Treasury Inflation-Protected Securities (TIPS) rose to 2.487%, indicating that the market expects average annual inflation of approximately 2.5% over the next five years. In a phase where inflation expectations rise faster than nominal interest rates, the opportunity cost of holding gold decreases relatively, providing strong support for gold prices.
Brian Jacobsen, chief economist at Annex Wealth Management, points out that "for the manufacturing recovery to turn into a revival, the conflict with Iran needs to be short-lived, rather than the protracted quagmire that people are worried about." The market's current concern lies precisely in the possibility that this conflict could escalate into a protracted war. If a prolonged war leads to stagflation, the investment value of gold will become even more prominent.
The impact of geopolitical conflict on the gold market is not only reflected in the financial sphere, but its effects on the physical gold market are also beginning to emerge. Three metal industry sources revealed that flight cancellations caused by the attacks will severely restrict the flow of physical gold through the Dubai gold trading hub in the coming days. Dubai is one of the world's most important gold trading centers, connecting western producers with eastern consumer markets; disruptions to its flow will disrupt the global gold supply chain.
Meanwhile, the sharp fluctuations in the US stock market are also strengthening gold's safe-haven appeal. Although US stocks recovered some ground after a sharp drop in early trading, sectors such as travel, airlines, and cruise lines suffered heavy losses, with Delta Air Lines falling over 2% and Carnival Cruise Line plunging 7.6%. In stark contrast, energy and defense stocks performed strongly, indicating that market funds are shifting from risky assets to defensive sectors. Against this backdrop, gold, as a traditional safe-haven asset, continues to see increased inflows.
In summary, the gold market is currently at the intersection of multiple positive factors. Geopolitical risks are at their highest level in recent years, with no signs of easing in the short term; shipping disruptions in the Strait of Hormuz are driving up oil prices, and inflationary pressures continue to accumulate; the Federal Reserve's monetary policy is facing a dilemma, and lower real interest rates are providing support for gold; and restrictions on the circulation of physical gold are further exacerbating supply shortages.
Trump's statement that "the bigger wave of attacks is yet to come" implies that the situation could worsen further. Until the uncertainty dissipates, safe-haven demand will continue to dominate market trends. Technically, gold has broken through the $5,300 mark and is just a step away from its all-time high of $5,596. If the conflict escalates further or inflation data continues to exceed expectations, gold prices are expected to challenge new highs. While focusing on geopolitical developments, investors should also closely monitor the upcoming US ADP employment data, non-farm payroll report, and inflation indicators, as these data will provide further clues about the Federal Reserve's policy path.
(Spot gold daily chart, source: FX678)
At 07:40 Beijing time, spot gold was trading at $5332.44 per ounce.
Geopolitical conflicts escalate across the board, with risk aversion dominating market trends.
The current situation in the Middle East is at its most dangerous juncture in decades. Following the US-Israeli airstrikes against Iran, the conflict has not only failed to be contained but has spread outwards at an alarming rate. The death of Iran's Supreme Leader Ayatollah Khamenei in the attack marked a turning point in the rapidly deteriorating situation. In response, Hezbollah, backed by Iran, launched missiles and drones at Israel, prompting a massive Israeli airstrike on the southern suburbs of Beirut, killing at least 31 people and injuring 149. Simultaneously, the Iranian Revolutionary Guard claimed responsibility for attacking a US military base in Kuwait, destroying 10 drones. The conflict has even spread to Cyprus, with a missile striking the Royal Air Force's Akrotiri base in the UK.
In an interview, US President Trump stated that military operations could last for weeks and warned that "a much larger offensive is yet to come." US Central Command confirmed that six US personnel have been killed in the conflict, and the accidental downing of three US F-15E fighter jets by Kuwait further highlighted the chaos on the battlefield. The US State Department has urged US citizens in 14 Middle Eastern countries to immediately evacuate via commercial channels, citing "serious security risks."
For the gold market, geopolitical risk has always been one of the core driving factors. The current conflict has exceeded previous market expectations in both breadth and depth, extending from Iran to Lebanon, Kuwait, and Cyprus, showing a comprehensive spread. David Meger, Director of Metals Trading at High Ridge Futures, pointed out, "The market is currently trying to determine whether there will be further blows in the coming weeks, and it is this uncertainty that is supporting gold prices." Until the situation becomes clearer, safe-haven demand will continue to provide upward momentum for gold.
Amid escalating conflict following the US-Israel attack on Iran, the US State Department urged Americans in more than a dozen Middle Eastern countries to leave via commercial routes, citing “serious security risks.” The State Department stated on Monday that Americans should leave Bahrain, Egypt, Iran, Iraq, Israel, the West Bank and Gaza, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates, and Yemen. US Secretary of State Marco Rubio stated on Monday that “the heaviest blows from the US military are yet to come,” while an Iranian commander threatened to attack ships transiting the Strait of Hormuz.
Shipping disruptions in the Strait of Hormuz and soaring oil prices exacerbate inflation concerns.
The impact of the Middle East conflict on global energy markets is rapidly becoming apparent. Iranian commanders have publicly threatened to attack any ships attempting to cross the Strait of Hormuz, the world's most vital oil shipping route, which carries approximately one-fifth of the world's daily seaborne crude oil trade. According to data from Lloyd's List Intelligence, ship traffic through the strait has decreased by more than 80% since the start of the military operation, with only one crude oil tanker passing through on Sunday.
Oil prices surged in response, with U.S. crude futures rising as much as 12% intraday on Monday before closing up 6.28% at $71.23 a barrel; Brent crude rose 6.68% to $77.74 a barrel. Qatar has suspended liquefied natural gas production, and several oil and gas facilities in the Middle East have implemented preventative shutdowns, further exacerbating supply-side uncertainty.
The rapid rise in oil prices is spreading to broader economic sectors. The US ISM Manufacturing Purchasing Managers' Index for February showed that input prices jumped to 70.5 from 59.0 in January, reaching their highest level since June 2022. It's worth noting that this data reflects pre-war conditions, and inflationary pressures are expected to intensify further in the coming months. For gold, rising inflation expectations are generally beneficial, especially against the backdrop of economic growth pressures, where gold's safe-haven status against inflation will become even more prominent.
Shifting expectations for monetary policy are supporting gold prices as real interest rate trends gain momentum.
The rapid rise in inflation expectations is reshaping market expectations for the Federal Reserve's monetary policy. The CME FedWatch tool shows that market expectations for a June rate cut by the Fed have fallen from 57.4% before the conflict to 45.2%. The U.S. Treasury market reacted more directly, with the two-year Treasury yield surging 11.1 basis points to 3.49%, the largest single-day increase since June of last year; the ten-year Treasury yield rose 8.6 basis points to 4.048%.
From the perspective of gold pricing logic, while rising nominal interest rates certainly exert downward pressure, the increase in inflation expectations is even greater, pushing real interest rates lower. The break-even yield on five-year US Treasury Inflation-Protected Securities (TIPS) rose to 2.487%, indicating that the market expects average annual inflation of approximately 2.5% over the next five years. In a phase where inflation expectations rise faster than nominal interest rates, the opportunity cost of holding gold decreases relatively, providing strong support for gold prices.
Brian Jacobsen, chief economist at Annex Wealth Management, points out that "for the manufacturing recovery to turn into a revival, the conflict with Iran needs to be short-lived, rather than the protracted quagmire that people are worried about." The market's current concern lies precisely in the possibility that this conflict could escalate into a protracted war. If a prolonged war leads to stagflation, the investment value of gold will become even more prominent.
The circulation of gold at Dubai's gold hub is hampered, putting physical supply to the test.
The impact of geopolitical conflict on the gold market is not only reflected in the financial sphere, but its effects on the physical gold market are also beginning to emerge. Three metal industry sources revealed that flight cancellations caused by the attacks will severely restrict the flow of physical gold through the Dubai gold trading hub in the coming days. Dubai is one of the world's most important gold trading centers, connecting western producers with eastern consumer markets; disruptions to its flow will disrupt the global gold supply chain.
Meanwhile, the sharp fluctuations in the US stock market are also strengthening gold's safe-haven appeal. Although US stocks recovered some ground after a sharp drop in early trading, sectors such as travel, airlines, and cruise lines suffered heavy losses, with Delta Air Lines falling over 2% and Carnival Cruise Line plunging 7.6%. In stark contrast, energy and defense stocks performed strongly, indicating that market funds are shifting from risky assets to defensive sectors. Against this backdrop, gold, as a traditional safe-haven asset, continues to see increased inflows.
Conclusion: Uncertainty dominates the market, and gold is expected to continue its strong performance.
In summary, the gold market is currently at the intersection of multiple positive factors. Geopolitical risks are at their highest level in recent years, with no signs of easing in the short term; shipping disruptions in the Strait of Hormuz are driving up oil prices, and inflationary pressures continue to accumulate; the Federal Reserve's monetary policy is facing a dilemma, and lower real interest rates are providing support for gold; and restrictions on the circulation of physical gold are further exacerbating supply shortages.
Trump's statement that "the bigger wave of attacks is yet to come" implies that the situation could worsen further. Until the uncertainty dissipates, safe-haven demand will continue to dominate market trends. Technically, gold has broken through the $5,300 mark and is just a step away from its all-time high of $5,596. If the conflict escalates further or inflation data continues to exceed expectations, gold prices are expected to challenge new highs. While focusing on geopolitical developments, investors should also closely monitor the upcoming US ADP employment data, non-farm payroll report, and inflation indicators, as these data will provide further clues about the Federal Reserve's policy path.
(Spot gold daily chart, source: FX678)
At 07:40 Beijing time, spot gold was trading at $5332.44 per ounce.
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- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
