Gold Slips as Oil Surges on Iran War Fears; February CPI Offers Cold Comfort

Gold futures pulled back sharply on Monday, declining $32.60 to $5,148.70 per troy ounce, though the contract recovered meaningfully from a session low of $5,021.20 as buyers stepped in amid the day's volatility. Oil markets told an even more dramatic story: West Texas Intermediate crude surged to nearly $119 per barrel before reversing course to settle at $94.70 — a swing of roughly $24 that left traders searching for stable footing.

The catalyst behind the turbulence in both commodity markets is the ongoing military conflict between the United States, Israel, and Iran — a confrontation that erupted on February 28th when American and Israeli forces conducted coordinated airstrikes targeting senior Iranian leadership. The strikes killed Supreme Leader Ali Khamenei along with several other high-ranking officials, setting off a chain of events that has kept global energy and safe-haven markets on edge ever since.

The geopolitical situation grew more complicated over the weekend with the announcement of Khamenei's successor. In a move that drew immediate international condemnation, Iran's clerical establishment named Mojtaba Khamenei — the late supreme leader's own son — to the post. The appointment was swiftly rejected by both Washington and Jerusalem. The Israeli military had publicly named Mojtaba as a target before the selection was even announced, while President Trump publicly declared the choice "unacceptable" and reiterated his administration's intention to have a role in shaping Iran's post-conflict leadership. Analysts widely view the succession as an indicator that this conflict could be protracted.

Gold's Counterintuitive Decline

Gold's behavior since the conflict began has confounded many market observers. The metal — historically one of the most reliable safe-haven assets in periods of geopolitical crisis — has actually declined by approximately $200 since the first airstrikes on February 28th, a move that runs counter to the conventional playbook.

The explanation lies in the immediate aftermath of the strikes, when the U.S. dollar surged as the primary beneficiary of flight-to-safety flows, effectively crowding out gold's typical role. A stronger dollar makes dollar-denominated commodities more expensive for foreign buyers, applying downward pressure on gold prices. More recently, the calculus has shifted: the market's attention has turned to how a protracted, energy-supply-disrupting conflict may reshape the Federal Reserve's monetary policy trajectory — a shift that has become a key driver of gold's price action.

CPI Data: Reassuring Numbers From Another Era

Tuesday morning brought the February Consumer Price Index report, which on its surface appeared benign. Headline inflation rose 0.3% month-over-month and 2.4% year-over-year, in line with economists' forecasts and showing little deviation from January's already-cooled reading. Core CPI — which strips out food and energy — climbed just 0.2% from January and 2.5% on an annual basis, a figure that would ordinarily be welcomed by investors anticipating Federal Reserve rate cuts.

Market participants, however, were quick to discount the figures. The February data was collected before the current Middle East conflict began, meaning the report captures none of the supply shock now rippling through global energy markets. With Iran's geographic position astride the Strait of Hormuz — a 20-mile-wide chokepoint through which approximately 20% of the world's seaborne oil supply transits — the conflict has already rendered the busy waterway effectively impassable for commercial shipping. In the twelve days since hostilities began, tanker operators have avoided the route entirely, unwilling to expose vessels to the risk of Iranian missile fire.

The implication for inflation is significant. Any further cooling in energy costs that February's data might have suggested is likely to be reversed sharply in the March and April reports, as supply disruptions work their way through the market. That prospect has made the Fed's rate path considerably murkier, and it is this uncertainty — more than the geopolitical headlines themselves — that appears to be weighing most heavily on gold.

Near-Term Outlook

Gold futures had already slipped $14.80 on Wednesday, and overnight trading Thursday showed the contract down an additional $12.00, changing hands at $5,166.00 in overseas markets. The pattern suggests persistent selling pressure as long as the dollar remains firm and the market debates how far a Middle East energy shock might push the Fed off course.

Traders and analysts will be watching two primary variables: first, whether diplomatic back-channels produce any de-escalation signals, and second, whether oil's volatility stabilizes or continues to transmit inflation risk into Fed policy expectations. Until either question is resolved, gold is likely to remain caught between its traditional geopolitical premium and the dollar-strength headwind that has defined its trading since late February.

Wishing you as always good trading,