A Market’s Muted Response to Hormuz Escalation
Despite oil volatility and geopolitical risks, gold prices remained stable as diplomatic efforts temper safe-haven demand, with focus on key US-Iran ceasefire expiration.
The seizure of a cargo ship, renewed threats against the Strait of Hormuz, and a ceasefire ticking toward expiration created one of the most volatile trading sessions of the year for commodities on Monday. Yet gold, the traditional haven, displayed remarkable composure. The precious metal traded around $4,804 an ounce, virtually flat on the day and holding within a narrow band between $4,790 and $4,850. This stability, in the face of oil’s wild swings, underscores a complex tension between geopolitical risk and shifting diplomatic winds.
The immediate catalyst for market-wide anxiety is the strategic Strait of Hormuz. A brief period of calm ended abruptly when Iran re-imposed restrictions on the critical waterway, warning that passing ships could be targeted. The U.S. further escalated tensions by confirming its forces had secured an Iranian-flagged cargo ship in the Gulf of Oman. This chokepoint, through which roughly 20% of the world’s oil and gas flows, is now at the center of what analysts call the largest disruption to global energy supplies since the 1970s.
While Brent crude futures whipsawed, plummeting 10% on Friday before rallying nearly 5% on Monday, gold’s reaction was muted. Renewed diplomatic efforts in the Middle East have tempered some safe-haven demand. Data from the futures market shows a rise in speculative open interest, while hedging activity has receded. Physical demand remains robust, however, with nearly 20,000 delivery requests filed this month, equivalent to roughly 62 tonnes.
Should investors sell immediately? Or is it worth buying Gold?
The precious metal’s performance over a longer horizon tells a different story. It remains up a staggering 39% year-on-year and is on track for a fourth consecutive weekly gain. This strength is partly anchored in the expectation that a lasting US-Iran agreement could dampen inflation risks and limit the need for further central bank rate hikes. Technically, the market opened with a gap down but recovered slightly, with traders watching to see if the $5,000 level comes back into focus.
All eyes are now on a pair of diplomatic deadlines. A US-Iranian ceasefire, mediated by Pakistan, is set to expire on Wednesday, with President Trump signaling he is unlikely to extend it. A separate ten-day truce between Israel and Lebanon holds until April 26. A second round of direct talks is scheduled for Sunday in Pakistan, with US negotiators departing on Monday in a bid to keep dialogue alive.
This impending diplomatic reckoning creates a pivotal moment for gold. If the US-Iran ceasefire lapses on Wednesday and the Hormuz blockade persists, the market will be forced to recalculate the geopolitical risk premium priced into the metal. For now, gold balances between its role as a crisis barometer and the pressure of a stronger dollar, which often rises alongside heightened global uncertainty. Its path in the coming days will be dictated by headlines from Pakistan, each capable of moving billions in value within minutes.
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