In recent weeks, global financial markets have been rattled by escalating geopolitical tensions, particularly the outbreak of war between Israel and Iran in mid-June and ongoing conflict between Ukraine and Russia. These developments have significantly influenced investor sentiment, driving a surge in demand for safe-haven assets—most notably, gold.
Iran-Israel conflict escalates
The conflict between Israel and Iran intensified dramatically in the second week of June 2025, following Israel’s pre-emptive airstrikes on Iranian nuclear and missile sites. These strikes reportedly killed senior Iranian military officials and nuclear scientists, prompting swift retaliation from Iran in the form of drone and missile attacks.
The escalation has raised fears of a broader regional war in the Middle East, a region critical to global energy supplies and stability.
US Strikes Deepen Crisis
In a dramatic escalation of the tensions, on 22nd June , the United States bombed three Iranian nuclear facilities, claiming to have “obliterated Iran’s ability to create nuclear weapons.”
The strike, following Israel’s earlier attacks, has triggered widespread uncertainty across global financial markets. Oil prices surged nearly 18% in the weeks leading up to and following the attack, with Brent crude nearing $80 per barrel.
Investors fear Iran may retaliate by closing the Strait of Hormuz, a vital route for nearly 26% of global oil trade. This has raised inflation concerns and pressured currencies like the Indian rupee, which has already begun to weaken.
Gold surges to record highs
Global equity markets showed mixed reactions, with safe-haven assets gaining traction. Gold is expected to remain a key hedge amid escalating conflict and economic uncertainty.
As a result, gold prices have surged, with overseas spot gold nearing an all-time high of $3,451 per ounce. Meanwhile, in the domestic futures market, prices tested a record high of Rs 99,929 per ten grams in the MCX futures platform.
This spike reflects heightened investor anxiety and a flight to safety amid growing geopolitical uncertainty. Historically, gold has served as a hedge against geopolitical risk, and the current crisis has reaffirmed its role as a refuge in turbulent times.
Iran-Israel ceasefire offers temporary relief
On 25 June 2025, Iran and Israel agreed to a ceasefire after nearly two weeks of intense conflict, including US airstrikes on Iranian nuclear facilities. The ceasefire, brokered by US diplomats, marks a tentative step toward de-escalation in the Middle East.
Global financial markets responded with cautious optimism. Oil prices, which had surged nearly 15% during the conflict due to fears of supply disruptions, fell sharply overnight. Brent crude dropped below $75 per barrel, easing inflationary concerns and boosting investor sentiment.
Equity markets showed modest gains, while safe-haven assets like gold saw a slight retreat. London spot gold, which had climbed above $3,400 during the peak of tensions, dipped to around $3,295 as the risk appetite returned.
The impact of ceasefire is most pronounced in commodity markets, especially oil, which influences inflation and global growth.
Ukraine-Russia conflict continues to exert pressure on global markets While the Israel-Iran war has dominated headlines, the ongoing conflict between Ukraine and Russia continues to exert pressure on global markets. The prolonged war has disrupted energy supplies, strained European economies, and contributed to inflationary pressures worldwide.
These factors have reinforced the bullish outlook for gold. Investors are increasingly wary of prolonged instability and its implications for global growth, prompting them to diversify away from riskier assets and into gold.
Beyond geopolitical factors, macroeconomic conditions have also played a crucial role in shaping gold’s trajectory. Recent US inflation data for May 2025 came in softer than expected, with the Consumer Price Index (CPI) rising just 0.1% . This has strengthened expectations of interest rate cuts by the Federal Reserve, potentially as early as September 2025.
Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, making it more attractive to investors. Additionally, central banks—particularly in China and Russia—have continued accumulating physical gold as part of their strategy to diversify away from the US dollar.
This sustained demand has contributed to a 29 percent increase in gold prices so far this year. Over the past two-year, gold has raised over 70 percent reflecting its enduring appeal as a safe-haven asset .
What next in gold?
Looking ahead, the underlying drivers—geopolitical risk, inflation concerns, and monetary policy shifts—remain firmly in place. This may prompt gold to trade near record highs. In addition, the dual impact of the Israel-Iran war and Ukraine-Russia conflict has created a potent mix of risk factors that are unlikely to dissipate soon.
The recent surge in gold prices underscores the metal’s enduring appeal as a safe-haven asset during times of geopolitical and economic turmoil. As the world grapples with the fallout from the Israel-Iran war and the ongoing Ukraine-Russia conflict, investors are likely to maintain their bullish stance on gold. With central banks signaling dovish policies and global risks mounting, gold remains a cornerstone of defensive investment strategies in 2025.
Over the past 10 years, gold has proven its resilience and value as a long-term investment. Both London spot gold and Indian gold prices have more than doubled, reflecting global trends and local market dynamics. As economic and geopolitical uncertainties persist, gold is likely to remain a cornerstone of diversified investment portfolios.
