Geopolitical Tensions Drive Energy Prices and Risk Aversion

Renewed geopolitical tensions in the Middle East, including US strikes on Iran and threats to key maritime shipping routes, are fostering a risk-off sentiment across global markets. This has contributed to elevated European gas prices and a surge in oil prices, as physical data suggests ongoing crude export disruptions from the region despite some market assumptions of a return to normal.

US Dollar Strengthens on Flight to Safety

The US Dollar has recovered some of its recent losses as the tense geopolitical backdrop and an equity market selloff spur a flight to safety among investors. This risk-averse environment is limiting the dollar's downside and putting pressure on other currencies, including the New Zealand Dollar. The ongoing energy shock is seen as a key factor supporting the US currency.

Hawkish Fed Outlook and Stronger Dollar Cap Gold

Gold's recent price rally has stalled below the $4,000 level, weighed down by a stronger US Dollar and a hawkish outlook from the Federal Reserve. Rising oil prices are reviving inflation concerns, which reinforces market expectations that the Fed could raise interest rates later this year. One Fed official noted that persistently high inflation remains a primary concern, a sentiment that caps bullish momentum for the precious metal.