As of the time of writing, spot gold had risen 1.8% to $5,374, while silver gained 2.6% to trade above $96. New York WTI crude futures climbed to $80.82, and Brent crude reached $82.37. Meanwhile, Japan’s Nikkei 225 opened down 1.5%, and U.S. equity futures remained broadly lower, with Dow, Nasdaq, and S&P 500 futures all down around 1%.

1.Gold: The King of Safe Havens Reclaims Its Throne — But How Long Can the “Emotional Premium” Last?

In early Monday trading, spot gold’s gains quickly exceeded 2%, briefly approaching $5,400 per ounce, marking the highest level since late January. The weekend’s developments have strengthened the fundamental case for gold: in an increasingly uncertain world, gold continues to benefit from safe-haven inflows, supported by strong retail and central bank demand. Some research institutions expect prices could approach $6,000 by year-end.

However, it is important to distinguish between an “emotional premium” and a true fundamental repricing. The immediate upside faces resistance at $5,400, followed by the late-January high of $5,595. If the conflict does not expand to key oil-producing nations such as Saudi Arabia, gold may shift into high-level consolidation after the initial safe-haven spike. As Indosuez Wealth Management’s Asia Chief Strategist Francis Tan noted, rising oil prices, falling U.S. rates, higher gold prices, and equities down about 1% provide a logical excuse for profit-taking in the short term.

2.Oil: Tankers Under Fire in the Strait of Hormuz — Will Prices Keep Burning Higher?

As of Monday morning Beijing time, WTI crude was up more than 7.7% to $72.18, while Brent rose roughly 8% to $78.78. More alarming, Iran’s Islamic Revolutionary Guard Corps reportedly announced a ban on vessel passage through the Strait of Hormuz. A tanker attempting transit was struck and began sinking, while three U.S. and British oil tankers in the Persian Gulf were hit by missiles. According to Kpler data, approximately 13 million barrels of crude per day pass through the Strait, accounting for around 31% of global seaborne oil flows. This is no longer merely a “risk of disruption,” but an actual supply interruption.

UBS analysts emphasized that the speed at which traffic through the Strait of Hormuz can be restored, along with the scale of Iranian retaliation, will be critical factors for oil prices in the coming days. Barclays analysts noted that the ultimate trajectory remains difficult to predict, but the oil market must confront worst-case scenarios, with Brent potentially rising toward $100 per barrel. UBS warned that expectations of major supply disruption could push spot Brent above $120.

The most pessimistic voices suggest that the situation could surpass the severity of the 1970s Arab oil embargo, potentially sending oil into triple-digit territory and LNG prices back toward their 2022 highs. Andy Lipow, President of Lipow Oil Associates, warned that the worst-case scenario would involve attacks on Saudi oil infrastructure followed by a complete closure of the Strait of Hormuz, estimating the probability of such an outcome at roughly one-third.

3.U.S. Stocks: Fragility at Elevated Valuations Exposed

In stark contrast to the surge in gold and oil, U.S. equities came under broad pressure. Early Monday trading saw Nasdaq 100 and Dow futures down more than 1%, while S&P 500 futures fell around 0.9%. Elevated valuations in global equities and credit markets have made investors more sensitive to risk reduction.

It may not yet be time to buy the dip. Investors have grown accustomed to geopolitical flare-ups resolving quickly, but this conflict could last longer — involving potential U.S. casualties, leadership decapitation strikes, and shipping disruptions in the Strait of Hormuz. A buying opportunity may emerge if the S&P 500 declines more than 10%, but that threshold has not yet been reached.

Sector divergence will also be important. Energy and metals stocks may lead, while traditional defensive sectors such as real estate and utilities could benefit. Defense stocks are likely to gain on expectations of increased demand. Meanwhile, non-essential consumer sectors — particularly airlines and retailers — may suffer from rising oil prices.

BNP Paribas Wealth Management Chief Investment Strategist Stephan Kemper warned that oil poses the primary downside risk. Persistently high oil prices could hurt growth prospects and inflation data, making it more difficult for the Federal Reserve to cut rates, thereby undermining recent gains in cyclical equities.

The Key Risk Variable: The Strait of Hormuz

If the conflict remains limited to targeted strikes and symbolic responses, and the Strait remains open, oil prices may stabilize after an initial spike. If tensions escalate and shipping lanes face significant threats — even without full closure — rising insurance costs and slower deliveries could keep prices elevated.

The most dangerous scenario would involve a full military escalation and either a temporary or prolonged closure of the Strait. Given that Saudi Arabia, the UAE, Iraq, Kuwait, and Qatar depend heavily on this passage with limited alternatives, oil prices could rapidly surge toward $80 and potentially beyond $100. Such a scenario would have profound implications for inflation expectations, central bank rate paths, and consumer confidence.

Another variable to monitor is the “negotiation signal” hinted at by U.S. President Trump, who stated that Iran wants to negotiate and that he is open to talks. While seemingly contradictory to the hardline military posture, this suggests that diplomatic channels remain open. Should substantive negotiations emerge, markets could swiftly reprice part of the current risk premium.