Iran War: Fuel Prices Up, Stocks and Precious Metals Down

Around 10 days after the beginning of the joint U.S.-Israeli attacks on Iran, oil and other fuel prices have predictably soared. A barrel of Brent Crude surpassed the $100 mark when markets reopened after the weekend, shooting up as high as $118 momentarily, and stood at around $105 as of 6 a.m. Eastern Daylight Time. Iran supplied 4 percent of global oil production in 2024, delivering mostly to China, and due to its vicinity to the Strait of Hormuz – an oil freighter choke point – it has the ability to throw global oil markets into disarray. Other than in the aftermath of the Russian invasion of major gas producer Ukraine, natural gas prices were affected less severly.

Safe haven assets like precious metals typically soar in the face of global instability, but over the past 10 days, gold, silver and palladium prices dropped by up to 10 percent. Their value was influenced in this case by a stronger dollar, as they are traded in dollars on international exchanges. As a oil exporter, the United States' currency strengthened on the news of the conflict, making gold pricier internationally.

The dollar also strengthened in 2022, but the new conflict dashing all remaining hopes of a U.S. rate cut put the final downwards pressure on the metals' prices. As inflation is now expected to rise, higher central bank rates are expected to be kept in place, in turn keeping investors more committed to bonds and treasuries instead of switching to gold, while these rates in 2022 had still been at zero per the monetary policy at the time.

Stock prices dropped since the conflict started, for example in Germany and the United States, as the world now expects higher inflation and higher interest rates. Bitcoin, sometimes also seen as a safe haven, rose on the news. Other than gold, Bitcoin as a highly speculative asset is seen to directly benefit from expected liquidity increases, which could be the case if governmental funds are freed up to aid a crisis.