Geopolitical storm clouds over the Middle East are poised to supercharge prices of gold and other safe-haven currencies like the dollar and yen, according to a Wednesday report from DBS Bank. Tensions between the US, Israel, and Iran have investors scrambling for security.
The analysis predicts widening spreads on government and corporate bonds, while central banks hold monetary policy steady in the immediate future. This flight to quality underscores the market’s anxiety over escalating conflicts.
DBS Chief Economist Taimur Baig points to Iran’s ability to mine the Strait of Hormuz, a move that could cripple shipments despite minimal direct naval threats. Such disruptions would inflate insurance rates, shipping expenses, and crucially, energy costs on a global scale.
Baig foresees broader regional entanglement: “Northern Kurds and southern Baloch insurgencies could trigger regime change battles, syncing with conflict resolutions and dragging Turkey, Iraq, and others into the fray.”
The bank’s dire forecast: A sustained Hormuz blockade would shatter oil exports from Gulf nations, overwhelming even America’s strategic stockpiles in a total crisis. Oil could skyrocket to $100-150 per barrel, fueling inflation, boxing in the Fed on rate cuts, and amplifying recession threats worldwide.
Rejecting silver’s role as a gold proxy, DBS notes its heavy industrial demand—nearly 60%—and limited market depth make it unreliable for diversification. As Middle East flashpoints intensify, traditional safe assets remain the go-to refuge.