For four months, a widespread assumption dominated the gold market: when the US-Iran war ended, gold would fall. The logic seemed sound — wars create safe-haven demand, and when the war ends, that demand disappears, so the price drops. This weekend the war effectively ended. The US and Iran reached a peace deal, Trump ordered the naval blockade lifted, and the Strait of Hormuz is reopening. And gold rose to $4,325. The assumption was wrong. Here is the mechanism almost everyone misunderstood.
The key insight is that the 2026 Iran war was not a normal war for gold. In a normal war, gold rises on fear and falls on peace. But this war suppressed gold rather than lifting it, because the closure of the Strait of Hormuz created an oil shock that drove inflation, which forced the Federal Reserve to stay hawkish, which strengthened the dollar, which pushed gold down. The war was bearish for gold, not bullish — an unusual situation that confused many observers throughout the conflict.
This means the end of the war works in reverse. Peace reopens the Strait of Hormuz. Oil flows freely again and prices fall — crude was already down more than 6% last week in anticipation, and is set to fall toward $80 and below. Falling oil collapses the energy-driven inflation that has gripped the US economy. Last week’s May CPI showed headline inflation at 4.2% but core inflation rising just 0.2% month-on-month, proving the inflation was almost entirely energy-related. Remove the energy spike and inflation falls fast. That frees the Federal Reserve from its hawkish posture, weakens the dollar, and finally lets gold’s powerful structural forces operate without the oil-inflation headwind holding them back.
Those structural forces are formidable. Central banks bought gold at record rates throughout 2025 and 2026. In 2025 alone, gold set 53 new all-time highs and central banks surpassed 5,000 tonnes of reserves for the first time in recorded history. Mine supply grows at just 1–2% per year. Global debt continues to deteriorate. None of these forces went away during the war — they were simply masked by the temporary oil-inflation suppression. With peace removing that suppression, they can finally drive the price again. For Gulf jewellery buyers, this is a pivotal moment. Gold at $4,325 is rising off a seven-month low, with the single biggest bearish factor of 2026 — the war — now being removed. The structural bull case that drove gold to $5,589 in January is reasserting itself. Buyers who waited through the war’s price suppression may find that the window of lower prices is now closing.
