Gold falls as US Iran conflict shifts rate outlook

Thursday 11 June 2026 - 08:30

By: Dakir Madiha

Gold falls as US Iran conflict shifts rate outlook

Gold prices extended their decline for a second straight session as markets reacted to escalating military tensions between the United States and Iran while simultaneously reassessing the trajectory of US interest rates. Spot gold dropped 3.5 percent to 4,111.95 dollars per ounce, marking its lowest level since March 23. The move came even as oil prices climbed, reflecting heightened concerns over potential disruptions to global energy supply routes.

The latest escalation followed renewed US military strikes on Iranian-linked targets after the destruction of a US Apache helicopter. Iran responded with missile and drone attacks on American installations across Jordan, Kuwait, and Bahrain. The exchange of fire deepened regional instability and increased the risk of wider confrontation in the Middle East, particularly around strategic shipping lanes.

Financial markets shifted focus away from traditional safe haven demand and toward inflation dynamics. Traders increasingly priced in the possibility that the US Federal Reserve could tighten policy further rather than ease it. Data from the CME FedWatch tool showed expectations for a potential rate hike reaching 67 percent by December. Inflation indicators added to the uncertainty, with core consumer prices rising 0.2 percent in May after a 0.4 percent increase in April, while producer price data remains under close watch.

Oil markets reacted in the opposite direction to gold. Brent crude climbed to around 94 dollars per barrel as fears intensified over supply disruptions near the Strait of Hormuz, a corridor responsible for roughly one fifth of global oil flows. Reports indicated restricted navigation through the waterway, increasing concerns that prolonged tensions could sustain higher energy prices and further complicate inflation trends.

Analysts noted that despite short term pressure, gold continues to benefit from longer term structural support driven by central bank demand and persistent inflation risks. Market participants remain split between geopolitical risk aversion and monetary tightening expectations, creating volatile conditions across commodities and broader financial markets.