US-Iran Conflict Sends Gold Prices Tumbling on Rate Hike Expectations

The US-Iran conflict has led to increased expectations of a rate hike by the Federal Reserve, with market participants assigning a 92% probability to an interest rate increase at this week's meeting.

This represents a significant rise from just one week ago, when the probability was only 59%. With a higher likelihood of a rate hike, gold prices have fallen as investors weigh the potential impact on inflation and economic growth.

The US dollar has strengthened against other currencies, with benchmark energy prices surging above 5% in response to the ongoing conflict. The disruption to oil supplies has also pushed crude prices higher, with Saudi Arabia's east-west pipeline shut down due to attacks by Iran-backed Houthi militants.

While the pipeline is expected to be offline for three to five weeks while repairs are made, markets remain on high alert for potential further disruptions. Qatar has warned against closing the Bab el-Mandeb Strait, which would have catastrophic consequences for global trade and commerce.