By Teresa Rivas
In the new normal, black gold may outshine the original.
Since the start of the Iran War on Feb. 28, gold hasn't lived up to its safe-haven reputation. As of the close of last week's trading, it was down 13% from its January high and had fallen 7.5% year to date. Part of the problem is the impressive run gold recorded previously: The precious metal gained 65% in 2025, its largest one-year net gain on record, and biggest one-year percentage move since 1979.
But market dynamics have also turned against gold. "A stronger U.S. dollar, higher oil prices, and a repricing of rate expectations have lifted real yields and reduced the appeal of nonyielding assets," writes UBS Strategist Wayne Gordon on Monday. Those headwinds may mean a lower-for-longer price for gold, and he slashed $1000 off his end-of-June estimate for gold to $5200, "reflecting softer investor demand amid elevated volatility."
The outlook for oil, by contrast, has never looked stronger: The longer the conflict in the Middle East drags on, the higher prices will remain. Even if a cease-fire were penned today, it wouldn't lead to a reversion to prewar prices. Jefferies analysts led by Lloyd Byrne published a report, "Is Crude & Diesel the Next Gold? Longer-Term Oil Price Assumptions Need to Rise," to this effect.
At the start of the year, global supply and demand was mostly in balance. With the start of the Iran War "and the drawdown in global inventories, we will increasingly need a short term U.S. shale supply response that is unlikely to materialize," says the Jefferies note, dated April 5. The problem is that the shale business has evolved, from chasing price swings to becoming more focused on returns and capital efficiency. "Activity is now concentrated among disciplined public operators who correctly view stop-start development as value-destructive, and current strip pricing fails to justify the multi-year investment required for market rebalancing."
In other words, the market can no longer count on shale producers to immediately jump in to fill in supply gaps. Even with West Texas Intermediate crude back at the high-$60s/low-$70s in 2027, "management teams show little appetite to accelerate activity...They want to see both price and duration before acting." It would take WTI around $85/barrel to see any meaningful growth, Byrne estimates.
At the same time, the war drains more global supply with each passing day. Some of that has so far been masked by lifting sanctions and releases from strategic reserves. But even with gas prices over $4 per gallon in the U.S., the true "severity of supply tightness" hasn't been felt, Byrne writes, as "refiners have yet to actively compete for barrels."
Ultimately, that means oil prices still have room to move higher. Add in the White House's at-times erratic approach to international affairs, and it's obvious why nerves may remain frayed even after a cease-fire.
"How comfortable can investors be when the limited excess global spare capacity and approximately 20% of identified world liquid natural gas growth sits behind the Strait," Bryne asks. Previous pricing was "predicated on elastic U.S. supply and geopolitical stability. Both assumptions now need to be revisited. There are also rising concerns about OPEC production returning to pre-conflict levels, pushing energy to regaining a role as a core real-asset hedge, not merely a cyclical trade."
Ongoing threats to energy infrastructure will remain in the background, while oil supplies will remain tight for years as countries look to rebuild their reserves.
Therefore he recommends investors add to oil stocks on any pullbacks. His top picks are Ovintiv, ConocoPhillips, EOG Resources, Northern Oil & Gas, Cenovus Energy, Condor Resources, SLB, Baker Hughes, and Halliburton.
Stocks are rising today on the latest hope for peace talks, but those have tended to disappoint. Even if this proves to be the exception, a near-term reversion to prewar oil prices sounds like a pipe dream.
Write to Teresa Rivas at teresa.rivas@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 06, 2026 13:37 ET (17:37 GMT)
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