Gold has steadied in Asian trading but remains on course for its first weekly decline in five weeks, having shed three per cent since Monday as a surge in crude oil prices reignites inflation anxieties and dims prospects for an early easing of monetary policy. The precious metal hovered near $4,686 an ounce on Friday after a four-week winning streak was broken by a 17 per cent leap in Brent crude above $105 a barrel, driven by the continued disruption to shipping through the Strait of Hormuz. While the extension of the ceasefire between the United States and Iran has been welcomed in diplomatic circles, the waterway — through which about a fifth of the world’s oil passes — remains largely closed, a reality that markets are now pricing with growing unease.

Viewed from the Gulf, the security calculus is precarious. The ceasefire extension bought time for negotiations but did not resolve the underlying standoff over Iran’s nuclear programme or the naval patrols that had triggered the initial blockade. Regional analysts point out that even a partial reopening of the strait would take weeks to restore normal traffic flows, and any further miscalculation could send crude still higher. For oil-importing economies across Asia and Europe, this translates directly into higher production costs and consumer prices, compounding the inflationary pressure already evident in supply chains.

From Washington, the Federal Reserve faces a tightening dilemma. The combination of elevated energy costs and resilient labour markets argues against the rate cuts that bullion investors had been anticipating. Higher-for-longer interest rates increase the opportunity cost of holding non-yielding assets such as gold, and the dollar’s recent strength has added a second headwind. The Biden administration is publicly urging restraint from all parties in the Gulf, but its leverage is constrained by the broader breakdown in US-Iran relations that preceded the current crisis.

Analysts in London note that gold’s retreat is as much a story about oil as it is about monetary expectations. Kelvin Wong, a senior market strategist at OANDA, argues that as long as the risk of a prolonged closure of the Strait of Hormuz persists, crude will remain elevated and gold will struggle to regain its upward momentum. The metal had rallied strongly in recent weeks on safe-haven demand and central-bank buying, but those gains are now being erased by a more potent narrative of persistent inflation and delayed rate cuts.

Looking ahead, the trajectory for gold will hinge on two variables: the speed at which Hormuz traffic can be restored, and the Fed’s reading of the inflation data in the weeks ahead. A diplomatic breakthrough that reopens the strait could knock oil prices sharply lower and revive gold’s appeal as a hedge against financial uncertainty. Conversely, any escalation in the Gulf — or a surprise upward tick in US inflation — would reinforce the current sell-off. For now, the market is betting that the path of least resistance for gold remains downwards, at least until the fog of geopolitics begins to clear.