Oil prices surge, dampening Fed rate cut expectations, gold fails to hold above $5,000

CNBC Finance APP has learned that gold prices once fell below $5,000 per ounce, coinciding with the third week of the Middle East conflict—after a key energy infrastructure was attacked last weekend, causing a sharp rise in international oil prices and forming a significant bearish factor. Gold prices initially dropped 1% in early trading, continuing the previous two weeks of decline.

Rising energy prices and inflation pressures triggered by the conflict have significantly weakened market expectations for rate cuts by the Federal Reserve and other major central banks. Specifically, after the U.S. launched military strikes on Iran’s main oil export hubs, Tehran quickly retaliated with attacks on energy infrastructure in several Arab countries, directly causing crude oil prices to surge.

Uncertainty about the duration of the war makes it extremely difficult to assess its impact on the market and the overall economy. According to a senior aide to U.S. President Trump, the ongoing conflict, now in its third week, is expected to continue for another four to six weeks. However, there are fundamental disagreements between the U.S. and Iran—Trump claims Iran “wants to reach an agreement but the U.S. demands better terms,” while Tehran has explicitly stated they are “not seeking negotiations or a ceasefire.” This strategic standoff complicates market judgments about the conflict’s trajectory.

As the war drags on, the outlook for a Fed rate cut is becoming increasingly bleak. The latest U.S. consumer spending data released last Friday further confirmed economic weakness: although the data was collected before the outbreak of war in January, weak economic growth meant that spending barely increased that month. Meanwhile, concerns about conflict-driven gasoline price hikes have continued to rise in recent weeks, causing U.S. consumer confidence to fall to its lowest in three months.

Market traders generally expect the probability of a rate cut at this week’s Fed meeting to be close to zero. Rising borrowing costs typically exert downward pressure on non-yielding assets like gold, but current geopolitical turmoil is reshaping this logic—although rising oil prices may temporarily suppress gold, concerns about “stagflation” (a combination of slowing economic growth and high inflation) are prompting investors to view gold as a more attractive long-term store of value.

Regarding specific price movements, spot gold initially fell 0.7% to $4,986.34 per ounce in early trading, but has since rebounded 0.17% to $5,027.89; silver futures showed similar volatility, dropping 0.7% earlier and now rising 0.99% to $81.37.