US-Iran Conflict Drives Oil Price Surge and Precious Metals Sell-Off

Key Developments:

• Crude oil prices reached a 52-week high, surpassing $100 per barrel, as tensions in the Middle East escalated.
• Brent crude oil climbed 15% to around $107 per barrel, extending last week's sharp 28% rally.
• Spot gold rate fell 2.12% to $5,049 per ounce, while spot silver prices plunged 3.51% to $81.34 per ounce.

Risk Environment:

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• The conflict involving Iran entered its second week, with major producers curtailing output and shipping through the Strait of Hormuz effectively brought to a halt.
• Investors reduced exposure to riskier assets and moved funds into safer options, with the US dollar strengthening against all of its Group-of-10 counterparts.

Impact on Global Markets:

• The United Arab Emirates and Kuwait began scaling back oil production, disrupting energy markets and impacting global supply.
• The effective shutdown of the Strait of Hormuz has slowed exports from the world's leading oil-producing region.

Precious Metals:

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• Gold and silver have faced pressure as surging crude oil prices fueled inflation concerns in the US, increasing the chances that the Federal Reserve may keep interest rates higher for longer.
• Elevated borrowing costs and a stronger dollar generally weigh on precious metals, with bullion acting as a source of liquidity for investors amid a deepening sell-off in global equities.

Outlook:

• The depth and duration of the conflict remain highly uncertain, with the dollar's safe-haven status and the US' position as a net energy exporter supporting its strength.
• The People's Bank of China has continued its buying streak, adding more gold in February, extending its buying streak to 16 consecutive months.