(Bloomberg) — Gold declined as an escalation in tension over the Strait of Hormuz drove oil prices higher, rekindling concerns over high inflation.
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Bullion fell as much as 1.6% before paring some losses during US hours. US and Iran tensions grew over the Strait of Hormuz with both sides maintaining their blockades of the critical waterway, creating an uneasy standoff with no new peace talks on the horizon. Brent extended its advance above $106 a barrel on worries that peace talks have stalled, rhetoric is amping up and military threats are increasing. Treasury yields and the dollar also climbed.
Higher energy prices since the war began in late February have stoked concerns about persistently high price pressures, something that may prompt the Federal Reserve and its peers to keep interest rates elevated for longer or even raise them further. That’s negative for non-yielding bullion.
US President Donald Trump on Thursday ordered the US Navy to shoot any boat putting mines in the strait, while the military said it intercepted two oil supertankers that tried to evade its effort to prevent passage to and from Iran’s ports. US forces boarded a “sanctioned stateless vessel” transporting oil from Iran in the Indian Ocean overnight, the Pentagon said.
The precious metals market is “going to remain cautious and volatile,” Rhona O’Connell, head of market analysis for EMEA and Asia at trader StoneX Group Inc., said in a note. “Professional trading houses remain reluctant to commit large positions in the face of such febrile geopolitical conditions.”
Spot gold fell 1% to $4,694.04 an ounce at 4:58 p.m. in New York. Silver slid 2.9% to $75.45 an ounce. Platinum and palladium also declined.
–With assistance from Jack Ryan.
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