Spot gold fell sharply for a second consecutive trading session on Monday, touching its lowest level since July 1. The primary driver behind the selloff was the rapid escalation of tensions in the Middle East, particularly the United States' decision to reinstate a maritime blockade on Iran. The move has intensified concerns over global energy supplies and significantly altered expectations for monetary policy.

The regional conflict has evolved from isolated tensions into a broader geopolitical crisis. US President Donald Trump announced that the United States would restore its maritime blockade on Iran and impose a 20% fee on all cargo transiting the Strait of Hormuz. The measure directly targets Iran's claimed closure of the strategic waterway and aims to re-establish control over one of the world's most important energy shipping routes. In response, crude oil futures surged more than 9% on Monday.

As the world's most critical oil transit corridor, any disruption to shipping through the Strait of Hormuz immediately raises concerns about global energy supplies. At the same time, missile and drone attacks between Iran and the United States have continued, an attack on a UAE oil tanker resulted in casualties, and Yemen's Houthi forces ended their ceasefire with Saudi Arabia by launching missile strikes. These developments have further heightened regional instability, slowed shipping activity, and prompted countries to explore alternative trade routes. In the short term, however, the sharp rise in energy prices has become an unavoidable market reality.

The surge in oil prices has significantly increased global energy and transportation costs, creating a fresh source of inflationary pressure. For gold, traditionally viewed as a safe-haven asset, this stagflationary environment has instead become a headwind. Higher energy costs often encourage central banks to adopt a more hawkish monetary policy to contain inflation rather than easing financial conditions.

Market expectations for Federal Reserve policy have shifted rapidly in response to the oil price shock. According to the CME FedWatch Tool, traders are now pricing in a 75% probability of a September rate hike. Federal Reserve Governor Christopher Waller reinforced these expectations by stating that if upcoming inflation data remains well above the Fed's 2% target, policymakers may need to raise interest rates in the near term.

Against this backdrop, gold's appeal as a non-yielding asset has weakened considerably. Escalating Middle East tensions have pushed oil prices higher while increasing the likelihood that the Federal Reserve will keep interest rates elevated for longer. This combination represents a double negative for gold. Should oil prices continue climbing, the precious metal could face further downside pressure.

Although geopolitical conflicts typically drive investors toward safe-haven assets, this time the market response has been notably different. Rather than aggressively buying gold, investors have shifted toward the US dollar, while Treasury yields have moved higher, reflecting stronger expectations for tighter monetary policy.

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