Bullion analyst Sanjiv Arole examines how the prolonged US–Israel war on Iran has disrupted markets, challenging gold’s safe-haven status as a stronger dollar and rising yields reshape global dynamics.
On 28 February 2026, Israel and the US launched a war on Iran expecting a swift outcome. Instead, the conflict has dragged on, unsettling global markets and creating prolonged uncertainty. As the war entered its second month, there was no clear resolution in sight, with financial indicators reflecting mounting stress. Brent crude surged close to its 52-week high, hovering around $113–114 per barrel, while the Dow slipped to 45,216 on 30 March, drifting away from its peak of 50,512. The US dollar index strengthened to around 100.15, gaining over 2.7% since the war began.
Precious metals initially reacted as expected. Gold and silver had already reached record highs in late January, with gold touching $5,600 per ounce and silver crossing $121 per ounce. Following a brief correction, the outbreak of war pushed gold back up to $5,400 and silver to nearly $100. However, this rally proved short-lived. By the week ending 26 March, gold had dropped sharply to around $4,504, while silver fell to $67.795. Earlier that week, gold had even plunged to $4,098, raising concerns about whether its safe haven status was weakening. Far from it!
Historically, geopolitical conflict boosts gold due to its safe haven appeal, with prices rising on a “war premium” that fades once stability returns. In prolonged conflicts, gold typically tracks the shifting dynamics of supply, demand, and investor sentiment. However, this war has unfolded differently. A key factor has been the sharp rise in energy prices and disruptions in global oil and gas supply chains, driven by constrained shipping routes. Since oil continues to be priced largely in US dollars, the demand for the currency has surged, reinforcing its dominance.
This strengthening of the dollar, coupled with rising global bond yields, has placed downward pressure on gold. Instead of gold, the dollar has emerged as the primary safe haven during this phase of the conflict. The longer the war continues, the greater the risk of recession or stagflation, as elevated energy prices feed inflation while slowing growth. In such a scenario, gold may regain prominence after the conflict, particularly if fiat currencies weaken under economic strain. Industrial precious metals, however, could face headwinds from reduced global demand.
Inflation remains a central variable. Higher inflation typically leads to tighter monetary policy, which is unfavourable for gold. Under Federal Reserve Chair Jerome Powell, the response to inflation has consistently been higher interest rates. Even now, the Fed has signalled only one rate cut in 2026. With a leadership transition expected in May, uncertainty remains over whether this policy stance will continue or shift. Political pressure, particularly from Donald Trump, has been pushing for immediate rate cuts, adding another layer of unpredictability.
The war has also disrupted efforts toward de-dollarisation. Moves by China and Saudi Arabia to price oil in yuan, along with attempts by Russia and Iran to circumvent sanctions, appear to have slowed. The conflict has reinforced the dollar’s central role in global trade, which in turn has limited gold’s upward momentum. This raises questions about whether gold’s long-term trajectory has been altered or merely delayed.
Market perception has also played a role. The narrative surrounding the war has been largely one-sided, dominated by US briefings. While official accounts suggest significant damage to Iran’s military infrastructure, Iran’s continued resistance tells a more complex story. Limited visibility into the full scope of the conflict has led markets to react to incomplete information, contributing to volatility across commodities and equities. In this environment, the dollar has benefited most, reinforcing its safe haven appeal.
Despite recent price declines, analysts argue that gold’s long-term outlook remains intact. A report by London-based CRU suggests that gold’s future will depend less on traditional supply-demand factors and more on how investors and policymakers position it within the financial system. The current bull run, which saw gold rise from $2,000 to over $5,600, is viewed not as a speculative bubble but as a structural re-pricing linked to global debt levels and monetary credibility.
CRU also highlights the potential for extreme upside scenarios. With the US holding over 8,100 tonnes of gold in official reserves while the country’s broad money supply (M2) of nearly $22 trillion, a full gold backing would imply prices of around $85,000 per ounce. Even partial backing or modest asset reallocation could push prices significantly higher, with estimates ranging from $7,500 to $17,000 depending on the scale of shift.
A similar outlook comes from BNP Paribas Fortis, where the chief strategy officer sees current volatility as a temporary phase within a larger bullish cycle. She argues that deleveraging in paper markets contrasts with growing interest in physical assets. In a stagflationary environment, central banks may prioritise growth over price stability, allowing inflation to erode the value of fiat currencies. This could drive a structural shift toward hard assets like gold and silver, with long-term price targets of $10,000 and $200 respectively (Source: Kitco News).
The Swiss Bankers Association offers a more measured view. While acknowledging gold’s rising importance as a store of value, it does not necessarily foresee dramatic price surges. Instead, it emphasises gold’s role in a fragmented and politically sensitive global financial system. As geopolitical tensions and government debt increase, central banks are likely to diversify reserves, reducing reliance on traditional currencies and strengthening gold’s strategic relevance.
Meanwhile, the Federal Reserve remains cautious. With inflation at 2.4% during the conflict, Powell has indicated that any rate cuts will depend on labour market conditions. The Fed continues to monitor how the war impacts inflation and broader economic stability.
The geopolitical landscape adds further complexity. Iranian strikes on US-linked assets across the Gulf have strained regional alliances. Reports that the US has asked Gulf nations to fund the war effort have raised concerns about long-term commitments and trust. This could reshape post-war alliances and influence the future of the dollar’s dominance.
As uncertainty persists, the central question remains unresolved: is gold losing relevance, or merely waiting for the right conditions to reassert itself? For now, the dollar holds the upper hand. But structural shifts in the global economy, combined with rising debt and geopolitical fragmentation, suggest that gold’s role is far from diminished. It may not dominate the present moment, but it remains positioned for a potential resurgence.
Finally, all the reports from CRU, BNP Paribas Fortis and the Swiss Bankers Association have their origins in Europe. It would seem Europe is keen and ready to shift towards a financial system backed by gold. It also appears to be propagating for such a shift. Gold is almost ready to don the role of a new knight in shining armour!