Gold was supposed to be the safest war hedge, but the Iran conflict just did something to it not seen since 1983

Gold futures fell roughly 4% on Sunday night, wiping out all of their 2026 gains. Spot gold dropped to about $4,372 per ounce, marking a more than 10% decline last week; its worst weekly performance since 1983. This is a sharp drop for an asset widely seen as a safe haven during geopolitical turmoil.

According to Yahoo Finance, gold started 2026 with strong momentum after a historic 65% gain in 2025. But since the Middle East conflict escalated, the metal has fallen more than 14%. Greg Shearer, who heads base and precious metals strategy at JPMorgan, called this an “extremely brutal flush,” adding that gold appears caught up in a “contagion risk of a sell everything trade.”

The UAE, a major hub for the global gold trade, closed its airspace over the weekend. Several airlines suspended operations in the Gulf region, halting shipments of gold and silver that are normally transported in the cargo holds of passenger aircraft. Trading and logistics firms have said their metal shipments to and from Dubai have been paused indefinitely.

Gold is being crushed by the same forces that weakened it during the Ukraine war

Rising oil prices caused by the conflict have pushed up inflation expectations, raising concerns that the Federal Reserve and other central banks may not cut rates this year. Some European officials have even suggested a rate hike is possible. A stronger US dollar and rising bond yields are making gold less attractive. As Ewa Manthey, Commodities Strategist at ING, explained, a stronger US dollar and gold’s high liquidity can make it “a source of funds during stress episodes.”

This is similar to what happened in 2022, when the Ukraine war drove up oil prices and global inflation. The Fed raised rates, the dollar strengthened, and gold weakened throughout that year. Traders are now pricing in just 80% odds of more than one rate cut by the Fed this year, down from two cuts that were fully expected just days ago. Democrats have also taken note of the inflation issue, and how they’re using rising prices against Trump is becoming a major political story.

A deepening stock market selloff also forced some investors to sell their metals positions to cover margin calls elsewhere. Michael Haigh, commodity strategist at Societe Generale, pointed to this as a key pressure factor. Shearer from JPMorgan warned that combined economic, energy, and currency pressures could “trigger a sea change in central bank gold flows and buying behavior.”

Silver, copper, platinum, and palladium have also seen sharp declines, reflecting broader concerns about demand destruction across the metals market. Gold did rise early in the week as investors initially moved toward safer assets when the conflict widened. President Donald Trump said the US would continue its military offensive for as long as it takes, while Israel announced a “wave of strikes” targeting Iran’s command centers.

Iran attacked oil and gas infrastructure and threatened shipping through the Strait of Hormuz. Even before the weekend strikes, US manufacturing input prices had risen at their fastest pace since 2022, and JPMorgan Chase CEO Jamie Dimon warned that inflation could become a “skunk at a party” for the US economy. Recent data has already raised concerns, with worrying GDP figures pointing to US economic trouble casting doubt on the broader growth outlook.

Despite the current turbulence, JPMorgan analysts remain positive on gold over the longer term. They believe that if energy disruptions continue and inflation and growth impacts deepen, the conditions for gold will “likely quickly flip materially bullish.” They also noted that economic deterioration could drive a “sharp shift towards Fed easing as the employment side of the Fed’s dual mandate takes precedence.”