Gold and crude oil prices surge on Middle East tensions. What next for USD?
Gold surged near record highs amid Iran-Israel tensions; Dow Jones fell 200 points, and crude oil spiked to $80. Find out how the USD fared along with other safe-haven currencies like JPY and CHF.
Key points
- Gold prices surged past $2,500 due to rising tensions between Iran and Israel.
- US military actions in the Middle East caused the Dow Jones to fall over 200 points and crude oil futures to trade above $80.
- Crude oil prices hit their highest levels since mid-July, driven by fears of disrupted supply from the Middle East.
- The USD showed mixed reactions; it may weaken against safe-haven currencies like JPY and CHF amid increased geopolitical risks.
Gold prices break through $2,500
Gold futures traded higher following news of escalating tensions between Iran and Israel stemming from the recent assassination of Hamas leader Haniyeh on Iranian soil; gold is traditionally viewed as a flight-to-quality or safe-haven asset in times of war. The precious metal now trades near all-time highs above $2,500 after a strong rally into the weekend and throughout Monday. This surge underscores gold's traditional role as a hedge against economic uncertainty, further attracting investors amid rising global tensions.
US sending more military forces to Middle East
Geopolitical risks rose following the news of further US action in the Middle East, including the deployment of more US forces and recourses to aid Israel. This development helped the Dow Jones fall more than 200 points and crude oil futures trading above $80. Increased military presence amplifies concerns over sustained conflict, impacting various financial markets. Traders responded by shifting investments towards safer assets, reflecting the heightened anxiety over prolonged instability in the region.
Crude oil futures hit $80
Prices for the energy commodity traded at their highest since mid-July on fears that rising Middle East tensions could affect crude oil supply from the area. The potential disruption of oil exports led to increased prices, as traders anticipated supply constraints. This development highlights the sensitivity of oil markets to geopolitical events, emphasizing the importance of monitoring global conflicts.
How would war affect the US dollar?
The USD traded mixed following the news; the dollar can sometimes be viewed as a flight to quality, but the US's role in the Middle East could result in a bearish USD, especially compared to traditional safe-haven currencies like JPY and CHF. The complex interplay between geopolitical risk and currency strength means that while some investors may flock to the dollar, others might prefer the stability of the yen or Swiss franc, causing fluctuations in forex markets.
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