BY COMFORT OGBONNA
Gold prices declined on Tuesday as renewed U.S. military strikes in Iran pushed crude oil prices higher, increasing investor concerns that inflation could remain elevated and force central banks to keep interest rates high for longer.
Spot gold fell 0.9% to $4,529.50 per ounce during early trading, while U.S. gold futures for June delivery edged up slightly to $4,529.60. The precious metal came under pressure as traders reassessed the economic impact of escalating tensions in the Middle East and the growing risk of prolonged energy market disruption.
Investor sentiment weakened after U.S. Secretary of State Marco Rubio said negotiations with Iran may still take several days, reducing expectations for a swift diplomatic breakthrough. His remarks came shortly after U.S. forces launched what Washington described as defensive strikes in southern Iran, further intensifying geopolitical uncertainty in the region.
The conflict has continued to raise fears about supply disruptions from the Middle East, particularly as damage to energy infrastructure threatens to slow the recovery of oil exports even if a political agreement is eventually reached.
Kelvin Wong, senior market analyst at OANDA, said markets are increasingly concerned that the destruction caused by the conflict could prevent a rapid normalization of oil shipments from the Middle East to global markets.
According to Wong, investors are beginning to price in the possibility that persistent energy supply constraints could keep inflation elevated for a longer period than previously expected. That outlook has strengthened expectations that the U.S. Federal Reserve may be forced to maintain a tighter monetary policy stance or even raise interest rates again before the end of the year.
Oil prices climbed sharply alongside the renewed military tensions. Brent crude futures rose around 2% in Asian trading as uncertainty surrounding the Strait of Hormuz continued to dominate global energy markets. Traders remain focused on whether negotiations between the United States and Iran can eventually reopen the key shipping route and restore stable oil flows.
The Strait of Hormuz is one of the world’s most important energy corridors, handling a significant share of global crude oil and liquefied natural gas exports. Any prolonged disruption in the area has the potential to drive energy costs higher worldwide, increasing inflationary pressure across major economies.
Higher oil prices often strengthen inflation concerns because energy costs affect transportation, manufacturing and consumer goods prices globally. While gold is traditionally viewed as a hedge against inflation and geopolitical uncertainty, rising interest rates can reduce its appeal because the metal does not generate interest or yield.
As borrowing costs increase, investors often shift toward interest-bearing assets such as bonds and savings instruments, putting downward pressure on gold prices despite broader economic uncertainty.
Market expectations for future Federal Reserve policy have also shifted noticeably in recent weeks. According to CME Group’s FedWatch tool, traders are now pricing in a 56% probability that the Federal Reserve could raise interest rates again before December.
Other precious metals also moved lower during Tuesday’s trading session as broader market sentiment weakened. Spot silver dropped 2.1% to $76.45 per ounce, platinum declined 1% to $1,948.12, while palladium fell 1.4% to $1,378.89.
Analysts said volatility is likely to remain elevated across commodity markets as investors continue monitoring military developments, diplomatic negotiations and central bank expectations. With oil prices still highly sensitive to events in the Middle East, traders are expected to remain cautious about the outlook for inflation, interest rates and safe-haven assets in the months ahead.
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