Gold Surges to Two-Month High as Israel-Iran Tensions Rattle Global Markets

 

Gold prices have surged to their highest level in nearly two months, reaching $3,416 per ounce on Monday as escalating military tensions between Israel and Iran prompted investors to flee to safe-haven assets.

 

The precious metal has now gained for four consecutive trading sessions, with gold falling to 3,416.04 USD/t.oz on June 16, 2025, down 0.49% from the previous day, though it remains approximately $50 below its record high set in April.

 

The latest surge comes as weekend missile and drone attacks between the two Middle Eastern powers have intensified fears that the conflict could escalate into a broader regional war, threatening critical energy infrastructure and transport routes.

 

Bloomberg reported that gold jumped 0.6% during Monday morning trading in Asian markets, trading at $3,450 per ounce at one point.

 

The weekend hostilities have not only boosted gold prices but also sent energy costs soaring, creating additional inflationary pressures across global markets.

 

"Every time geopolitical tensions between nations intensify, investors turn to low-risk investments," said Phil Streible, chief market strategist at Blue Line Futures. "Gold, along with other safe-haven assets, benefits from this flight to quality."

 

 

Central Bank Gold Rush Continues

The rally comes against a backdrop of sustained central bank purchasing, with gold having risen more than 30% in 2024 and continuing that trajectory with another 30% gain since the start of 2025. The metal touched a record high of $3,500 per troy ounce in April.

 

 

 

 

According to a recent World Gold Council survey, diversification remains the primary motivation for central bank gold purchases, cited by two-thirds of respondents.

 

However, geopolitical risks, particularly concerns about sanctions or political pressure on reserves, were mentioned by 40% of central banks.

 

The survey reveals that one in four emerging market central banks explicitly linked their gold strategy to concerns about sanctions or anticipated changes to the global financial system.

 

Notably, half of the annual increases in gold reserve proportions among the top 10 holders since 1999 occurred after sanctions were imposed on the countries involved.

 

 

Gold Overtakes Euro in Global Reserves

In a significant shift in the global monetary landscape, gold has now secured its position as the world's second-largest official reserve asset by market value, surpassing the euro whilst remaining behind the US dollar.

 

This structural change, highlighted in the European Central Bank's latest report on the euro's international role, reflects price dynamics, central bank behaviour, and geopolitical realignments that have elevated gold's financial importance.

 

For many state actors, gold now serves as a hedge not merely against inflation or currency devaluation, but against the existing system's rules themselves. The metal's role has evolved from an inflation hedge to a geopolitical barometer and strategic financial anchor.
 

 

 

Oil Markets in Turmoil

The geopolitical tensions have also sent shockwaves through energy markets, with Brent crude oil falling to 73.71 USD/Bbl on June 16, 2025, down 0.71% from the previous day, though prices remain volatile following weekend spikes.

 

Oil futures surged as much as 14% following the military strikes, reaching their highest levels since Russia's invasion of Ukraine in 2022.

 

JPMorgan Chase has warned that closure of the Strait of Hormuz could send global oil prices soaring to $130 per barrel.

 

The volatility has triggered a rush into call options, with traders betting on further price increases.

 

Robert Yawger from Mizuho Securities USA observed: "Speculators often rush to buy any options that appear on their screens as quickly as possible, regardless of cost, particularly those hedging against short positions."

 

Open interest for oil options reached record levels on Friday, with nearly 38 million barrels worth of new contracts added throughout the week as investors sought various forms of risk protection.

 

 

Market Outlook

The current situation represents more than a typical cyclical or technically-driven movement. It reflects a fundamental reassessment of gold's role amid mounting global uncertainty and a shift in how reserve assets are managed - moving from purely financial optimisation to deeper strategic considerations.

 

As tensions continue to simmer in the Middle East, both gold and oil markets are likely to remain highly sensitive to geopolitical developments, with investors keeping a close watch on any escalation that could further disrupt global supply chains and financial stability.