In early April 2026, conflicts involving Iran have persisted for over a month, causing substantial disruptions to global energy markets due to shipping obstructions in the Strait of Hormuz. As a vital artery for more than 30% of the world's crude oil shipments, the closure of this strait has directly driven up energy costs: Brent crude prices briefly surpassed $110 per barrel, WTI crude stabilized above $100 per barrel, and the average U.S. gasoline price climbed to over $4.2 per gallon, reaching its highest level since August 2022.
Although the U.S. administration has repeatedly signaled that the conflict may ease by May or June, the energy supply shock has already begun to ripple through the entire industrial chain. Inflation data is highly likely to reflect this impact in the coming quarters. Notably, unlike the typical pattern of gold strengthening during the initial phases of past geopolitical conflicts, the safe-haven boost for gold this time has been not only limited but also quick to fade. The core reason is that this conflict primarily centers on an energy supply shock and has not triggered systemic financial risk or a credit crisis, leading to relatively restrained market expectations for further escalation. Conversely, inflation expectations fueled by rising oil prices have rapidly pushed up real yields and the U.S. dollar index, significantly increasing the opportunity cost of holding gold—after all, as a non-yielding asset, gold's appeal is directly tied to the returns of income-generating assets. Historical experience corroborates this logic: in similar Middle East conflicts dominated by oil price shocks, gold's safe-haven premium has often been short-lived, with changes in macroeconomic and financial conditions being the core factors determining price trends.
The transmission of oil prices to inflation involves both rapid short-term impacts and delayed long-term effects. The U.S. administration has prioritized controlling oil prices to avoid them becoming a political liability ahead of the midterm elections. Multiple institutions predict that if the conflict concludes by May or June, oil prices could fall below $100 per barrel, but the inflation transmission process is already irreversible. In terms of transmission mechanisms, prices for items like gasoline and fuel oil impact overall inflation (CPI/PCE) very rapidly: changes in retail gasoline prices are typically reflected in pump prices within one to two weeks and directly affect CPI data for the current or following month. This suggests that CPI readings for March and April may rebound, with overall inflation levels trending higher in the second quarter. According to a Goldman Sachs model, a sustained 10% increase in oil prices generally raises overall PCE by approximately 0.2 percentage points. In contrast, the pass-through to core inflation (excluding food and energy) is more moderate and delayed: a 10% oil price increase pushes core PCE up by only about 0.04 percentage points. The seepage of energy costs into sectors like transportation, manufacturing, and food takes 3 to 6 months, meaning the rise in core inflation may gradually become apparent from the summer to autumn of 2026. Even if oil prices decline later, accumulated cost pressures from the earlier period could continue to affect price levels.
The November 2026 midterm elections have made inflation a highly sensitive political issue. Polls indicate rising public dissatisfaction with increasing living costs, with high gasoline prices directly influencing voter intentions. The administration has taken measures such as releasing strategic petroleum reserves and encouraging OPEC+ to moderately increase production, but the marginal effectiveness of these actions is limited. In this context, policymakers face a dilemma: they need to address inflation to maintain public support, yet are reluctant to curb inflation through interest rate hikes—since higher rates could exacerbate an economic slowdown, further fueling voter discontent. Therefore, even if inflationary pressures persist, the likelihood of actual rate increases remains relatively low. However, discussions around "whether monetary policy adjustments are needed" are likely to increase, and these shifting expectations alone could tighten financial market liquidity by pushing up real yields and strengthening the U.S. dollar.
The Federal Reserve Chair has clearly stated, during the March FOMC meeting and subsequent communications, that the Fed will "look through short-term oil price shocks." The view is that the impact can be partially offset by measures like strategic petroleum reserve releases and enhanced international coordination, advocating for a patient, data-dependent observation approach. This stance has effectively dampened market speculation about rate hikes: the CME FedWatch Tool indicates a very low probability of a 25-basis-point hike in April, and a rate increase by year-end is not the prevailing market expectation. However, this policy framework faces potential challenges. If future inflation data consistently exceeds expectations, the Chair's "wait-and-see" strategy could face increased scrutiny. The Dallas Fed President has explicitly stated that if persistently high oil prices drive up inflation and core inflation declines more slowly than anticipated, a reassessment of the policy path would be necessary; a former Cleveland Fed President also mentioned the possibility of further measures to control inflation. It is noteworthy that even if actual rate hikes are difficult to implement due to political considerations, the intensification of policy discussions can still influence market pricing. Historical data shows that for every 25-basis-point strengthening in FOMC rate hike expectations, gold prices typically face short-term downward pressure of 1%-2%. While current rate hike discussions are at a low level, a resurgence of such talks in a scenario of persistently high inflation would exert further downward pressure on gold prices.
Gold's pricing is highly dependent on real interest rates and the U.S. dollar's trajectory: rising real rates increase the opportunity cost of holding gold, while a stronger dollar raises purchasing costs for non-U.S. investors, both exerting downward pressure on gold prices. The current oil price shock is exerting substantive pressure on gold precisely by boosting inflation expectations, which indirectly pushes up real yields and the U.S. dollar index. Although short-term safe-haven demand may provide some support, the dominant effects of yield curve adjustments and dollar strength are more significant. Additionally, adjustments to gold reserves by some sovereign nations due to fiscal or exchange rate pressures are also contributing to price volatility.
Key phases to monitor: April-June: Period of rapid reaction in overall inflation: Should CPI/PCE data exceed expectations, it will directly test the Fed's stance of "looking through" the oil shock, potentially increasing market volatility. July-September: Period of delayed core inflation effects: If core inflation data remains stubbornly high, discussions about rate hikes could intensify, posing greater downside risks for gold. September-November: Period of heightened policy sensitivity ahead of elections: Policy uncertainty before the midterm elections will reach a阶段性 high, and fluctuations in market expectations could amplify gold price volatility.
From a long-term perspective, structural supports for gold remain, including global central bank gold purchasing trends and geopolitical uncertainty. However, in the short term, investors should focus on changes in the 10-year U.S. Treasury real yield, the U.S. dollar index, and the yield curve, rather than relying solely on geopolitical conflicts or oil price fluctuations to gauge trends. Operationally, maintaining caution is advised, avoiding chasing rallies or selling off based on short-term sentiment, and prioritizing diversified allocations to navigate market volatility.
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