Recent tensions in the Strait of Hormuz have led to sharp fluctuations in international oil prices, while gold has been caught in a tug-of-war between rising inflation and shifting interest rate expectations.
Paul Gooden, Head of Global Natural Resources at asset management firm Ninety One, recently stated that the oil market is currently facing a historic supply disruption of 12 million barrels per day, surpassing the combined total of the two oil crises in the 1970s. Meanwhile, the structural bullish case for gold remains intact, supported in the long term by central bank purchases and geopolitical safe-haven demand.
The firm maintains a long-term structurally bullish stance on gold. Gooden noted that if market concerns over the Strait of Hormuz's prolonged closure turn pessimistic, it could exert temporary pressure on gold prices. However, the overall outlook remains positive.
He outlined four key drivers for gold: a weaker US dollar, as the US government appears to favor a softer currency; fiscal deficits, with the government using inflation to manage debt, which benefits gold as an inflation hedge; geopolitical uncertainty, prompting investors to increase gold holdings; and monetary policy. The first three drivers are currently robust. The fourth, monetary policy, introduces uncertainty as market expectations for Federal Reserve rate cuts to reduce the opportunity cost of holding gold have been challenged by persistent inflation, potentially delaying any easing.
Gooden emphasized that central bank gold buying represents the most significant structural force. Following the Russia-Ukraine conflict and the related sanctions, many central banks have recognized the risk of their dollar assets being "weaponized," leading to a near-doubling in their gold purchases.
From a reserve perspective, gold currently constitutes about 30% of global central bank reserves, still well below 1980s levels, indicating substantial room for growth. Retail investor gold holdings also remain below levels seen five or six years ago.
He cautioned that a prolonged closure of the Middle Eastern shipping route, pushing oil prices above $125 per barrel, would exacerbate overall inflation and drive interest rates higher. Last week, the yield on the 30-year US Treasury note surpassed 5%, signaling bond market concerns. While oil markets may not yet be in panic mode, bond markets clearly reflect existing risks. If the shipping channel remains closed, it would further complicate the Fed's ability to cut rates, creating short-term headwinds for gold.
Fundamentally, the long-term outlook for gold remains favorable. Central banks have room to increase holdings, individual investors continue to allocate to gold, and the US dollar is likely to weaken. Coupled with persistent geopolitical risks and high inflation—against which gold is an effective hedge—multiple factors support a long-term bullish view.
Regarding investment choices, Gooden highlighted a key distinction for investors. While gold stocks have underperformed the gold price in recent years due to cost inflation eroding profits, the situation has fundamentally changed. The rise in the gold price now far outpaces cost increases, leading to rapidly expanding profit margins. Furthermore, investing in gold stocks offers healthy free cash flow yields (around 10%), share buybacks, and dividends, whereas holding physical gold provides no yield. Therefore, at this stage, gold stocks are more attractive than the physical metal itself.
On oil prices, Gooden pointed out that current traffic through the Strait of Hormuz is nearly zero, compared to a normal daily flow of about 100 vessels. Approximately 20% of global oil and 20% of liquefied natural gas typically pass through this strait. Factoring in rerouting, the net supply disruption is about 12 million barrels per day. For comparison, each of the two 1970s oil crises involved disruptions of only about 5 million barrels per day, and the energy crisis triggered by the Russia-Ukraine conflict involved about 1 million barrels per day. "Twelve million barrels per day is larger than all three of those crises combined."
Facing this massive shortfall, the market is currently balanced by two mechanisms: drawing down inventories and demand destruction. The US reported its largest-ever weekly crude inventory draw last week, with exports running about 4 million barrels per day above normal, but this is unsustainable. In terms of demand destruction, Asian consumers, more sensitive to prices, have already reduced consumption; in Europe, it's reflected in flight cancellations; while in the US, clear evidence is not yet apparent.
If the strait remains closed, the situation will become more severe. Gooden estimates that a closure lasting until the end of June could lead to a cumulative loss of 1.5 billion barrels from global crude inventories. The world's truly available "excess inventory" is far below this figure.
For the medium-term oil price outlook, Gooden believes the Brent crude price benchmark will shift from $70 to $80 per barrel. He attributes this to two factors: the permanent embedding of a geopolitical risk premium, as Iran can close the Strait of Hormuz at any time, exposing 20% of global oil supply and all spare capacity to this risk; and the massive inventory drawdown, which will compel countries, especially those lacking strategic reserves, to replenish stocks over several years. Assuming a 1.5-billion-barrel inventory gap replenished over three years, this would create an additional daily demand of 1.5 million barrels, far exceeding the global crude market's natural demand growth of about 1 million barrels per day. Meanwhile, the oil and gas industry maintains capital discipline with no significant plans for large-scale production expansion, suggesting a tight supply-demand balance will persist long-term.
Ninety One is an active global investment manager with assets under management of $171.8 billion as of March 31, 2026.