Gold prices climbed 2% on Wednesday, rebounding sharply from a more than one-week low hit in the previous session, as the U.S. dollar took a breather and escalating military action in the Middle East — now in its fifth day — intensified safe-haven flows into the yellow metal.
Spot gold gained 1.8% to $5,175.39 per ounce by 0925 GMT, while U.S. gold futures for April delivery added 1.2% to $5,186.90. The metal has now risen 6.5% in February, contributing to a cumulative gain of 58% over the past seven months — one of the strongest sustained rallies in recent history.
The U.S. dollar index fell 0.1% against a basket of major currencies, making greenback-priced gold more affordable for buyers holding other currencies. The benchmark 10-year U.S. Treasury yield also eased, further reducing the opportunity cost of holding non-yielding gold.
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Jamie Dutta, market analyst at Nemo. money, explained the rebound, noting: “After the past few days of position unwinds and dollar strength, markets are back to a more typical macro risk-off stance, with silver higher too. A pause in the rise of the dollar and Treasury yields helps with their opportunity costs. Gold and silver’s safe-haven characteristics can shine again.”
Gold had fallen more than 4% on Tuesday as investors piled into the dollar amid inflation concerns that dimmed expectations for Federal Reserve rate cuts. However, Wednesday’s recovery pinpoints a return to classic safe-haven dynamics driven by geopolitical escalation.
Middle East Conflict Enters Fifth Day with Intensified Strikes
U.S. forces continued round-the-clock assaults on Iranian targets, while Israel mounted a “broad wave” of strikes on Wednesday targeting Iranian missile sites and air defense systems. The conflict — sparked by U.S.-Israeli strikes over the weekend that killed Iran’s Supreme Leader Ayatollah Ali Khamenei — has now engulfed Lebanon (via Israeli-Hezbollah clashes), Gulf states (Iranian missile/drone attacks on U.S. bases), and Cyprus (a British air base strike). President Donald Trump told the Daily Mail Sunday the military campaign could last “four to five weeks, but that it could go on far longer than that.”
Global Market Reaction
Oil prices have soared as the conflict disrupts infrastructure and shipping. Brent crude hit a new 52-week high Monday at $79.40 per barrel before further gains, with analysts now forecasting sustained levels above $80–$85 if disruptions persist. Saudi Arabia’s Ras Tanura refinery (550,000 bpd) remains shut after a drone strike, Iraqi Kurdistan fields are offline, Israeli Leviathan and Tamar gas fields are idled, and uncertainty surrounds Iran’s Kharg Island export hub. Shipping through the Strait of Hormuz — handling 20% of global oil and LNG — has nearly halted after vessel attacks on Sunday, with insurers cancelling war-risk cover and tankers anchoring (200 vessels).
Airspace closures continue to devastate westbound flights from India and Europe. Many Europe/U.K. routes remain cancelled or rerouted, adding up to four hours of flight time and significantly raising fuel costs. IndiGo and Air India have suspended flights to/from the UAE, Saudi Arabia, Israel, Qatar, and parts of Europe. Aviation expert Mark D. Martin estimated the weekly impact on Indian/international carriers at ~?875 crore ($96 million), with disruptions likely persisting for at least another week.
Asian stocks tanked overnight as investors dumped crowded bets on chipmakers, fearing an oil shock would raise inflation and delay rate cuts. U.S. futures and European markets opened lower Tuesday, with safe-haven flows supporting gold and bonds while the dollar weakened.
Although Trump said he intends to provide Naval escorts for ships, the conflict’s duration remains highly uncertain. An extended Strait of Hormuz disruption would push prices higher. The situation has created room for market volatility, and gold is expected to rise further as investors seek a hedge.