West Asia conflict jitters not enough: Iran war pushes oil up, but caps gold, silver gains

Gold and silver prices have turned highly volatile during the ongoing U.S.–Israel–Iran conflict, showing that geopolitical tension alone is no longer the only driver of precious metals. While the war initially pushed investors toward safe-haven assets, rising crude oil prices, a stronger dollar, and expectations of prolonged high interest rates have limited gains and triggered a sharp correction in bullion markets.

On the Multi Commodity Exchange (MCX), gold and silver are heading for one of their weakest weeks in over a month. Gold has fallen by more than ₹12,000 per 10 grams this week, while silver has dropped nearly ₹30,000 per kilogram, even as tensions in West Asia continue to escalate. The decline reflects growing concerns that higher oil prices could keep inflation elevated, forcing central banks to delay rate cuts and making non-yielding assets like gold less attractive.

Safe-haven rally fades

Prices had surged soon after the US and Israel launched strikes on Iran in late February, with gold briefly jumping above ₹1.66 lakh per 10 grams as investors rushed to safety. However, the rally quickly faded as oil crossed $110 per barrel and markets began pricing in a longer period of tight monetary policy. Analysts say this shift in expectations has outweighed the usual safe-haven demand seen during wars.

Gold had surged during last year’s 12-day conflict with Iran but lost those gains soon after a ceasefire was announced, highlighting how quickly safe-haven rallies can reverse. In the current conflict, the pattern has been even more unusual. Nearly three weeks into the latest tensions, domestic gold prices have already fallen by around ₹15,000 this month.

April gold futures had earlier climbed from ₹1,62,104 to ₹1,66,074 per 10 grams after the U.S. and Israel launched strikes on Iran on February 28, in line with the typical trend where investors rush to safe-haven assets during war. However, prices later dropped sharply, with gold falling to around ₹1,45,570, marking a steep correction from recent highs.

Gold is now on track for its worst monthly performance since October 2008, although it still remains more than 5% higher for 2026 overall, reflecting the strong rally seen before the conflict began. Silver futures slipped to around $69.66, their lowest level since December, marking the third straight weekly decline, and the metal is now down for the year so far.

Oil spike and rate fears weigh on gold, silver

Analysts say the biggest reason for the weakness in precious metals is the surge in crude oil prices, which has pushed up inflation expectations globally. Higher inflation reduces the chances of early rate cuts by the U.S. Federal Reserve, increasing the appeal of bonds and other yield-bearing assets over gold and silver.

A research report noted that the West Asia conflict has raised inflation risks and reduced expectations of rate cuts in 2026, which is limiting the upside in gold despite its safe-haven appeal. The report added that gold’s direction now depends on the balance between real yields, the U.S. dollar and geopolitical risk, rather than conflict alone.

Profit-booking after record highs

According to Ponmudi R, CEO of Enrich Money, COMEX gold corrected after retesting record highs near $5,300–$5,500 and is now trading around $4,450–$4,520, with the decline driven mainly by dollar strength and profit-booking even as geopolitical uncertainty continues. He said the $4,250–$4,400 zone is key support, while holding above $4,400 could allow a recovery toward $4,700–$4,800.

MCX gold has also slipped from the ₹1.55–1.60 lakh range to around ₹1.40–1.45 lakh, with ₹1.35–1.40 lakh emerging as an important demand zone. Momentum remains neutral to slightly bearish in the near term, though the broader trend still shows higher lows.

Silver has been even more volatile. COMEX silver has corrected sharply from near $95 to the $62–$70 range, with support seen near $60–$65. On MCX, silver is trading around ₹2.20–2.30 lakh, and a break below ₹2.15 lakh could trigger deeper losses, while stability above this level may allow a recovery toward ₹2.40–2.50 lakh.

Long-term trend still intact

Despite the recent fall, analysts say the broader bullish outlook for precious metals has not completely broken. Gold and silver had rallied strongly in 2025, driven by central bank buying, global uncertainty and expectations of lower rates, and some of the current decline is being seen as profit-booking after a strong run.

For now, the war has not produced the kind of sustained safe-haven rally seen in past crises. Instead, prices are being driven more by oil, inflation, interest rates and currency movements — a reminder that in the current cycle, macroeconomics matters more than geopolitics alone.