Gold Prices Drop Amid Inflation Fears and U.S.-Iran Escalation

Gold prices tumbled sharply during Asian trading on Monday, pressured by growing concerns over inflation and the prospect of prolonged high interest rates — even as geopolitical tensions between the U.S., Israel, and Iran continued to intensify.

The decline came after U.S. President Donald Trump issued a 48-hour ultimatum demanding Iran reopen the Strait of Hormuz, threatening to "obliterate" critical Iranian energy infrastructure if the deadline was not met. Tehran responded defiantly, warning of retaliatory strikes on energy and water facilities across the Middle East while threatening a full closure of the strategic waterway. With hostilities between Israel and Iran entering their fourth consecutive week, traders braced for potential further escalation.

Spot gold dropped 1.7% to $4,413.32 per ounce, while gold futures declined 3.5% to $4,448.46 per ounce. Prices briefly touched a session low of $4,320.19 per ounce. Other precious metals followed suit — spot silver eased 0.4% to $67.61 per ounce, and platinum slipped 0.6% to $1,913.57 per ounce.

Rather than boosting safe-haven demand as conflicts historically have, the ongoing Iran war is fueling inflation fears that are weighing on bullion. Markets increasingly worry that elevated energy prices driven by the conflict could force major central banks into a more aggressive monetary stance. Both the European Central Bank and the Bank of England recently signaled potential rate hikes, while expectations for U.S. Federal Reserve rate cuts have been steadily dialed back.

Analysts at OCBC noted that gold is currently driven less by geopolitical hedging and more by fears that persistent inflation could trigger a hawkish central bank pivot. They cautioned, however, that gold's long-term fundamental drivers remain intact, suggesting the metal could regain footing once the macroeconomic picture stabilizes.