Gold prices climbed to their highest level in two weeks during Wednesday's trading, supported by safe-haven demand as investors monitored efforts to contain the conflict in the Middle East while awaiting next week's Federal Reserve policy meeting.

In spot trading, gold was up 1.0% at $4,115.89 per ounce as of 20:01 GMT, after touching its highest level since July 7 earlier in the session.

Meanwhile, US gold futures for August delivery rose 1.1% to $4,120.60 per ounce.

Safe-haven demand supports gold despite inflation and oil concerns

US Secretary of State Marco Rubio said Washington remains willing to negotiate an end to the crisis with Iran, but added that Tehran is not serious about the negotiations.

At the same time, three oil tankers carrying Saudi crude to China and India changed course in the Red Sea on Tuesday following threats issued by the Iran-backed Houthis, helping push oil prices higher.

Although gold is traditionally viewed as a hedge against inflation, higher interest rates tend to reduce the appeal of the non-yielding precious metal.

According to a Reuters survey, the Federal Reserve is expected to leave interest rates unchanged through the end of 2026, while market pricing points to the possibility of two rate hikes by the end of March next year.

Data from the CME FedWatch Tool also indicates a 68% probability of an interest rate hike at the September meeting.

Bitcoin edged lower on Wednesday to trade near $66,000 as tensions in the Middle East continued to escalate. However, the cryptocurrency remains up more than 2.5% since the start of the week, supported by sustained institutional demand, continued inflows into US-listed spot Bitcoin exchange-traded funds, and optimism surrounding the CLARITY Act for digital asset market regulation.

The move came as the US military announced the completion of its eleventh consecutive night of strikes against Iran, targeting aircraft hangars and drone storage facilities.

US President Donald Trump also warned that American strikes would intensify, saying any site Iran attempts to use to rebuild its nuclear program would be targeted.

Iran, meanwhile, continued its attacks across the Gulf region, targeting US military assets in Bahrain, Kuwait, and Jordan. Tehran also said its forces had struck two oil tankers while they were passing through the Strait of Hormuz.

In another development, the Iran-backed Houthi movement announced the opening of a new front in the conflict and imposed a naval blockade on Saudi Arabia. The move increased uncertainty across global markets and weakened investor appetite for riskier assets, limiting Bitcoin’s gains.

ETF inflows and regulatory optimism support market confidence

Despite the geopolitical tensions, institutional demand for Bitcoin remains strong. Data from SoSoValue showed that US-listed spot Bitcoin ETFs recorded net inflows of $203.14 million on Tuesday, marking a sixth consecutive session of positive flows.

The continued inflows point to a gradual return of institutional investors to the cryptocurrency market, supported by hopes that an agreement could ease tensions between the United States and Iran. Analysts believe sustained inflows could help Bitcoin extend its recovery in the coming days.

At the same time, progress on the Digital Asset Market Clarity Act, known as the CLARITY Act, has strengthened market optimism after the White House agreed to include a broad ethics provision, potentially removing one of the main obstacles to the legislation.

The development is expected to clear the way for the bill’s final text to be completed before it is put to a vote in the US Senate. The legislation could be approved ahead of the targeted August deadline if it receives sufficient bipartisan support.

Jessica Martinez, US policy director at Fireblocks, told FXStreet that the digital asset market would continue to evolve regardless of whether the CLARITY Act is passed.

“The good news is that the market will continue moving forward whether the CLARITY Act passes or not. The question is which institutions will be prepared to keep pace with that development,” she said.

Martinez added that major financial institutions have already begun expanding their digital asset businesses under the current regulatory framework, while some more conservative banks and asset managers are still waiting for clearer and more durable rules that can withstand legal challenges or future changes in the US administration.

She said regulatory action by government agencies can provide guidance to the market, but legislation is what delivers long-term stability. Digital asset adoption is therefore likely to continue even without the law, although at a slower pace and with weaker institutional participation.

Oil prices climbed more than 4% during Wednesday's trading, approaching their highest levels in six weeks after Brent crude moved above $95 a barrel, as mounting concerns over potential supply disruptions in the Middle East continued to support the market. Ongoing military confrontation between the United States and Iran, along with threats from the Iran-backed Houthis against maritime shipping, remained the primary drivers of the rally.

Brent climbs above $95 as concerns grow over Hormuz and Bab el-Mandeb

Brent crude futures rose $3.82, or 4.2%, to $94.83 a barrel by 09:38 GMT after touching an intraday high of $95.24.

US West Texas Intermediate (WTI) crude futures gained $3.65, or 4.33%, to $87.99 a barrel.

Both benchmarks reached their highest levels since June 11.

The US military announced that it had carried out an eleventh consecutive night of strikes against Iran, shortly after Kuwait's military said its air defenses had intercepted Iranian drones.

In addition to renewed tensions surrounding the Strait of Hormuz, the Houthis opened a new front in the conflict by threatening to target ships transporting Saudi crude through the Bab el-Mandeb Strait and declaring a naval blockade on Saudi Arabia.

Tim Waterer, chief market analyst at KCM Trade, said the energy market is now facing a dual risk, with the Bab el-Mandeb Strait emerging alongside the Strait of Hormuz as another major geopolitical flashpoint while traders closely monitor shipping activity in the Red Sea.

He added that Bab el-Mandeb, located at the southern entrance to the Red Sea, has become increasingly important for Saudi crude exports after shipping through the Strait of Hormuz declined sharply again following the collapse of the US-Iran ceasefire agreement earlier this month.

Tanker rerouting and focus on US inventory data

Shipping data showed that three tankers carrying Saudi crude to China and India changed course in the Red Sea on Tuesday, heading toward the Suez Canal instead of sailing along the Yemeni coast.

Frank Walbaum, market analyst at Naga.com, said Houthi threats had forced tankers to alter their routes, increasing pressure on the physical oil market and potentially disrupting Saudi exports, a development that could continue to support higher prices.

The report added that Asian refiners have begun exploring alternative routes for Saudi crude shipments from the Red Sea port of Yanbu via the Suez Canal and around the Cape of Good Hope in response to the latest security threats.

Despite tighter global oil supplies caused by the conflict, preliminary data from the American Petroleum Institute (API) showed US crude oil and distillate inventories increased last week, while gasoline inventories declined, according to market sources.

The figures come ahead of official data from the US Energy Information Administration (EIA), due later on Wednesday, which investors will closely watch for fresh signals on supply and demand trends in the world's largest oil-consuming economy.

The US dollar rose for a fourth consecutive session on Tuesday, supported by higher oil prices as escalating tensions in the Middle East fueled concerns that inflationary pressures could persist for longer.

The US Dollar Index, which measures the greenback against a basket of major currencies, gained 0.17% to 101.16.

The euro fell 0.11% to $1.1402, while the British pound declined 0.39% to $1.3376, marking its fourth consecutive daily loss, according to Reuters data.

The Japanese yen also weakened 0.41% to ¥163.14 per dollar, trading beyond the 163 level for the first time since December 1986 as investors watched for any signs of intervention by Japanese authorities to support the currency.

Currency markets remained focused on escalating geopolitical risks in the Middle East, where continued military confrontations have pushed oil prices higher, raising concerns over global energy supplies and the persistence of inflationary pressures.

The dollar's gains followed a ninth consecutive night of US airstrikes on Iran, reinforcing demand for the greenback as one of the market's preferred safe-haven assets during periods of heightened geopolitical uncertainty.