Gold prices declined in European trading on Monday, resuming losses after Friday's rebound and moving back toward a two-week low as a stronger US dollar and rising global oil prices pressured the precious metal amid escalating military strikes between the United States and Iran.

As the conflict intensified, Brent crude climbed above $90 a barrel, fueling concerns over inflation after several Federal Reserve policymakers signaled that further interest rate hikes may be needed to contain price pressures.

The Price

• Spot gold fell 0.9% to $3,982.77 an ounce after opening at $4,017.45 and reaching an intraday high of $4,030.85.

• Gold settled more than 1% higher on Friday after earlier touching a two-week low of $3,959.72 an ounce.

• The precious metal lost 2.5% last week, posting its second consecutive weekly decline as military tensions between the United States and Iran escalated.

US dollar

The dollar index rose around 0.2% on Monday, extending gains for a third straight session and reflecting continued strength in the US currency against a basket of global currencies.

A stronger US dollar makes dollar-denominated gold more expensive for holders of other currencies, reducing its appeal.

Investors continue to favor the dollar as a safe-haven asset as military strikes between the United States and Iran intensify and shipping traffic through the Strait of Hormuz declines.

Global oil prices

Oil prices climbed around 3% on Monday, extending gains for a second consecutive session and reaching their highest level in six weeks as Middle East tensions intensified and Iran threatened to halt all traffic through the Strait of Hormuz.

Higher oil prices are renewing concerns over accelerating inflation, potentially prompting central banks to raise interest rates in the near term.

Latest developments in the Iran conflict

• The United States launched a fresh wave of airstrikes against targets inside Iran for a ninth consecutive day.

• The US strikes targeted military sites linked to Iran's missile and defence capabilities in an effort to weaken Tehran's ability to control the Strait of Hormuz.

• Iran's Revolutionary Guard launched coordinated retaliatory attacks using ballistic missiles and drones against military bases hosting US forces across the region.

• Iran said that not "a single drop" of oil or gas would pass through the Strait of Hormuz if US military operations continued, escalating threats surrounding one of the world's most important energy routes.

• Shipping traffic through the Strait of Hormuz declined sharply as security risks, inspections, and reciprocal attacks continued.

• The US Navy said it had intercepted and rerouted six commercial vessels and disabled a seventh as part of efforts to enforce a strict naval blockade on Iranian ports and isolate the country's coastline.

US interest rates

• Cleveland Federal Reserve President Beth Hammack joined a growing number of policymakers arguing that higher interest rates may be necessary to bring persistent inflation under control.

• According to the CME FedWatch Tool, markets currently price an 86% probability that the Federal Reserve will leave interest rates unchanged at its July meeting, with a 14% chance of a 25-basis-point rate hike.

• For the December meeting, markets assign a 20% probability of rates remaining unchanged and an 80% chance of a 25-basis-point increase.

• Investors are closely watching upcoming US economic data to reassess those expectations.

Gold outlook

Kelvin Wong, Senior Market Analyst for Asia Pacific at OANDA, said military developments over the weekend had increased the risk of the conflict escalating into a broader confrontation between the United States and Iran, potentially creating further headwinds for gold.

"If current stagflation concerns become more deeply embedded in markets, the opportunity cost of holding the precious metal will rise," Wong said.

Over the longer term, Wong said he remains cautious on gold and is watching the key support level at $3,886. A break below that level could trigger a further decline toward $3,500 an ounce.

SPDR Gold Trust

Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell by 2.86 metric tons on Friday to 999.02 metric tons, the lowest level since September 25, 2025.

The euro extended its decline against the US dollar in European trading on Monday, falling for a third consecutive session as demand for the greenback remained strong amid mounting concerns over the escalating conflict between the United States and Iran.

Rising global oil prices at the start of the week renewed inflationary pressures on European Central Bank policymakers, raising concerns that inflation across the eurozone could accelerate once again.

The European Central Bank is scheduled to meet on Wednesday and Thursday for its fifth monetary policy meeting of 2026, with markets overwhelmingly expecting interest rates to remain unchanged.

The Price

• The euro fell around 0.2% against the dollar to $1.1424 after opening at $1.1438 and reaching an intraday high of $1.1444.

• The euro ended Friday down less than 0.1% against the dollar, marking its second consecutive daily decline amid renewed concerns over the Iran conflict.

• The single currency gained 0.2% against the dollar last week, posting its second weekly advance in the past three weeks as it recovered from lower levels.

US dollar

The dollar index rose around 0.2% on Monday, extending gains for a third straight session and reflecting continued strength in the US currency against a basket of major and minor currencies.

Investors continue to favor the dollar as a safe-haven asset as military strikes between the United States and Iran intensify and shipping traffic through the Strait of Hormuz declines.

Global oil prices

Oil prices climbed around 3% on Monday, extending gains for a second consecutive session and reaching their highest level in six weeks amid escalating Middle East tensions and Iranian threats to halt all traffic through the Strait of Hormuz.

The rise in global oil prices is renewing concerns over accelerating inflation, potentially prompting central banks to raise interest rates in the near term, a sharp reversal from pre-war expectations that rates would remain unchanged or be cut for an extended period.

Latest developments in the Iran conflict

• The United States launched a fresh wave of airstrikes against targets inside Iran for a ninth consecutive day.

• The US strikes targeted military sites linked to Iran's missile and defence capabilities in an effort to weaken Tehran's ability to control the Strait of Hormuz.

• Iran's Revolutionary Guard launched coordinated retaliatory attacks using ballistic missiles and drones against military bases hosting US forces across the region.

• Iran said that not "a single drop" of oil or gas would pass through the Strait of Hormuz if US military operations continued, escalating threats surrounding one of the world's most important energy routes.

• Shipping traffic through the Strait of Hormuz declined sharply as security risks, inspections, and reciprocal attacks continued.

• The US Navy said it had intercepted and rerouted six commercial vessels and disabled a seventh as part of efforts to enforce a strict naval blockade on Iranian ports and isolate the country's coastline.

European interest rates

• Amid rising global oil prices, money markets increased the probability of the European Central Bank raising interest rates by 25 basis points in September to above 95%.

• Investors are awaiting additional eurozone data on inflation, unemployment, and wages to reassess those expectations.

• The European Central Bank will meet on Wednesday and Thursday this week for its fifth monetary policy meeting of 2026, with markets almost fully pricing in no change to interest rates.

The Japanese yen fell against a basket of major and minor currencies in Asian trading on Monday, resuming losses against the US dollar after a brief pause on Friday and touching a two-week low.

The currency is moving closer to its weakest level in 40 years as investors increasingly turn to the US dollar as the preferred safe-haven asset amid escalating military strikes between the United States and Iran.

Global oil prices surged to their highest level in six weeks as supplies through the Strait of Hormuz were disrupted, renewing concerns over mounting inflationary pressures on the Bank of Japan and strengthening expectations of a Japanese interest rate hike in October.

The Price

• The dollar rose 0.15% against the yen to ¥162.58, its highest level since July 9, after opening at ¥162.36 and touching a low of ¥162.31.

• The yen ended Friday up less than 0.1% against the dollar, marking its third gain in four sessions amid speculation that Japanese authorities could intervene in the currency market.

• The yen lost 0.45% against the dollar last week, posting its second consecutive weekly decline as military confrontation between the United States and Iran intensified.

Japanese authorities

The yen has returned to the spotlight after moving close to its weakest levels against the US dollar since 1986, raising expectations that Japanese authorities could intervene to protect the currency from excessive depreciation.

US dollar

The dollar index rose around 0.2% on Monday, extending gains for a third consecutive session and reflecting continued strength in the US currency against a basket of global currencies.

Investors are increasingly buying the dollar as a safe-haven asset as military strikes between the United States and Iran continue to escalate, while shipping traffic through the Strait of Hormuz declines.

Global oil prices

Oil prices rose around 3% on Monday, extending gains for a second consecutive session and reaching their highest level in six weeks amid mounting risks in the Middle East and Iranian threats to halt all traffic through the Strait of Hormuz.

The rise in global oil prices is renewing fears of accelerating inflation, which could prompt central banks worldwide to raise interest rates in the near term, marking a sharp reversal from pre-war expectations that rates would either be cut or held steady for an extended period.

Latest developments in the Iran conflict

• The United States launched a fresh wave of airstrikes against targets inside Iran for a ninth consecutive day.

• The US strikes targeted military sites linked to Iran's missile and defence capabilities in an effort to weaken Tehran's ability to control the Strait of Hormuz.

• Iran's Revolutionary Guard launched coordinated retaliatory attacks using ballistic missiles and drones against military bases hosting US forces across the region.

• Iran said that not "a single drop" of oil or gas would pass through the Strait of Hormuz if US military operations continued, escalating threats surrounding one of the world's most important energy routes.

• Shipping traffic through the Strait of Hormuz declined sharply as security risks, inspections, and reciprocal attacks continued.

• The US Navy said it had intercepted and rerouted six commercial vessels and disabled a seventh as part of efforts to enforce a strict naval blockade on Iranian ports and isolate the country's coastline.

Japanese interest rates

• Amid rising global oil prices, markets increased the probability of the Bank of Japan raising interest rates by 25 basis points at its July meeting to more than 30%.

• Expectations of a quarter-point rate hike at the Bank of Japan's October meeting rose above 90%.

• Investors are awaiting further data on inflation, unemployment, and wages in Japan to reassess those expectations.

Oil prices jumped on Friday after Kuwait announced that an Iranian attack had struck a power generation and desalination facility, as military clashes across the Gulf continued to escalate.

Global benchmark Brent crude futures climbed 4.6% to settle at $88.10 a barrel, while US West Texas Intermediate crude futures gained 4.5% to close at $82.49 a barrel.

Kuwait's Ministry of Electricity, Water and Renewable Energy said the attack caused damage to the facility, triggering a fire that affected a large number of electricity generation units, according to the Kuwait Times.

Kuwait relies heavily on desalination plants to supply drinking water, and analysts have long warned that Iran could target critical infrastructure essential to civilian life across the Middle East.

Escalating conflict threatens energy supplies

Iran said it had targeted US positions in Bahrain, Jordan, Kuwait, Oman, Qatar, and Syria in retaliation for the latest wave of US strikes, according to the country's state-run Press TV.

In a separate development, the UK Maritime Trade Operations (UKMTO) said an oil tanker had been struck by a projectile off the coast of Oman, causing minor damage, according to a report issued on Friday.

The agency added that Iran had intensified attacks on oil tankers over the past week in an apparent attempt to force commercial vessels to transit the Strait of Hormuz through waters under its control.

Meanwhile, US Central Command (CENTCOM) said it had completed a sixth consecutive night of airstrikes against Iran, targeting dozens of military sites, including logistics facilities and naval assets.

CENTCOM added that more than 50,000 US troops are currently deployed across the Middle East and remain "fully vigilant and prepared."

The escalation follows the collapse of the fragile ceasefire reached last month, once again disrupting energy flows through the Strait of Hormuz, which normally handles around 20% of global oil trade.

Growing threats raise fears of wider conflict

In an interview with Fox News on Tuesday, US President Donald Trump said American forces would target Iranian infrastructure next week unless the two sides achieved a diplomatic breakthrough.

Iran's senior military leadership responded by warning that if Trump's threats were carried out, "everything that remains standing... all infrastructure across the region will be destroyed," according to a statement published by a military spokesman on Telegram on Thursday.

Separately, three sources told Reuters that Iran had asked Yemen's Houthis to close the Red Sea oil shipping route if the United States attacks Iranian energy infrastructure.

Despite the escalation, Rystad Energy continues to view a limited agreement between Washington and Tehran as the most likely outcome, although confidence in that assessment has weakened, according to Jorge Leon, the company's Head of Geopolitical Analysis.

Leon said both Iran and the United States still have strong economic incentives to avoid a complete collapse in negotiations. Washington wants to keep oil prices under control ahead of November's midterm elections, while Tehran remains reluctant to forgo potential economic gains.

"There is a substantial economic package on the table for Tehran, including access to frozen assets and potential export sanctions relief, benefits that it is unlikely to abandon permanently," he said.