Global Markets Remain Volatile Amid Ongoing Middle East Tensions

Renewed clashes in the Middle East have cast doubt over negotiations between the US and Iran to end the war, which has upended energy flows and heightened inflation concerns. As a result, gold prices have remained steady, hovering near $4,490 an ounce. Despite early losses of as much as 0.6%, bullion has since erased those losses.

The situation in the Middle East continues to escalate, with fresh attacks reported across the region. Iran fired ballistic missiles at Kuwait and Bahrain, although they were either intercepted or broke apart en route. Meanwhile, US forces conducted strikes on Iran's Qeshm Island, according to a post on X by US Central Command. Oil prices, however, have advanced for a third consecutive day, with Brent crude climbing toward $97 a barrel.

The ongoing conflict has had a significant impact on global markets, with bullion moving largely in an inverse relationship with oil since the conflict began in late February. As a result, gold prices have fallen sharply in the early days of the conflict and remain about 15% below their immediate pre-war level. However, in recent weeks, gold prices have traded in a narrow range.

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The protracted disruption to energy flows via the Strait of Hormuz has raised concerns around global inflation, making central banks more likely to keep interest rates steady or even raise them. This is a headwind for precious metals, which do not pay interest. US data released on Tuesday showed job openings jumped in April to the highest in almost two years, reinforcing bets that the Federal Reserve will hold interest rates higher for longer.

The Federal Reserve Bank of Cleveland President Beth Hammack has stated that it is reasonable to keep borrowing costs steady for now, given uncertainties about the economic outlook. However, officials may need to act soon to address elevated inflation.

Spot gold prices edged down 0.3% to $4,475.30 an ounce as of 9:02 a.m. in Singapore. Silver prices were 0.6% lower at $74.60 an ounce, while platinum and palladium prices were down marginally. The Bloomberg Dollar Spot Index, a gauge of the US currency, was little changed.

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