On June 23, 2025, an oil tanker was seen at the Khor Fakkan Container Terminal, a deep-water port along the Strait of Hormuz. On Thursday, as tensions between the United States and Iran continued to escalate, oil prices surged to their highest levels in nearly seven months, prompting investors to seek refuge in safe-haven assets such as gold.

The global benchmark Brent crude rose 1.6% to $71.49 per barrel, while U.S. crude increased 1.74% to $66.18 per barrel. This followed a sharp rise of more than 4% on Wednesday, marking the largest single-day gain since October of last year, with the upward trend extending into Thursday.

Gold, traditionally a safe-haven asset during times of uncertainty, climbed 2% on Wednesday, reclaiming the $5,000 per ounce level. It edged higher in early trading on Thursday.

The recent escalation comes as representatives from the U.S. and Iran held talks in Geneva regarding Iran's nuclear program. On Tuesday, U.S. Vice President JD Vance stated that Iranian negotiators had not acknowledged some of the "red lines" set by President Trump.

As negotiations continue, the U.S. has been increasing its military presence in the Middle East. The possibility of conflict with Iran has raised concerns about potential disruptions to global oil supplies and a subsequent surge in oil prices.

"Renewed geopolitical tensions between the U.S. and Iran have clearly been priced into the market," said Daniela Hathorn, Senior Market Analyst at Capital.com, in a report.

In recent weeks, gold has experienced significant volatility, trading more like a speculative stock than a traditional safe-haven asset. However, the escalation of Middle East tensions has reignited demand for safe havens, pushing gold above the $5,000 mark.

When U.S.-Iran tensions rise, global attention turns to the Strait of Hormuz. This narrow waterway along Iran's coast is a critical chokepoint for global oil supplies. According to data from the U.S. Energy Information Administration, approximately 20 million barrels of oil pass through the strait daily, accounting for about 20% of global petroleum consumption.

"The latest move in oil prices indicates that the market is pricing in a more significant geopolitical risk premium as the world's most important oil artery once again falls under the threat of conflict," said Ole Hansen, Head of Commodity Strategy at Saxo Bank, in a report.

Iranian media reported that Iran recently announced a partial, temporary closure of the Strait of Hormuz for planned naval exercises.

Markets often react mildly to geopolitical tensions, but the situation changes when a conflict has the potential to directly impact the global oil market, thereby affecting worldwide consumer prices and corporate decisions.

For example, Venezuela's limited role in the global oil market meant that U.S. actions against President Maduro did not trigger market panic. Iran is different, however, due to its proximity to a key global oil chokepoint, leading investors to become cautious.

"The energy market pays attention to the probability of an event, especially when potential supply disruptions involve a major oil producer and a critical global transit route," said Hathorn of Capital.com.

"Iran remains a major oil producer, and more importantly, it is situated at the heart of the Strait of Hormuz. The oil market is beginning to price in higher risks," she added. "Even a limited disruption to transit or a credible threat to shipping could immediately cause a supply shock."

The Strait of Hormuz is a vital passage for Iranian oil exports. Any obstruction would not only impact Iran's export operations but also affect countries like China, which imports significant quantities of oil from Iran.

The prospect of conflict with Iran has sparked fears of an oil supply shock, which could drive prices higher. Rising oil prices, in turn, increase consumer costs and exacerbate inflation.

"A more direct impact is that action against Iran could lead to a jump in oil prices, boosting inflation in most parts of the world and consequently slowing or reducing the number of interest rate cuts by major central banks," analysts at Capital Economics wrote in a report.

U.S. stock markets opened lower on Thursday. The Dow Jones Industrial Average fell 164 points, or 0.33%, the S&P 500 dropped 0.2%, and the tech-heavy Nasdaq Composite declined 0.1%.

"Given that inflation and affordability are currently core issues for the White House, we believe ensuring the free flow of oil through the Strait of Hormuz is a priority. This suggests a preference for diplomatic solutions; if diplomacy fails, a military plan that secures oil transit as much as possible would be pursued," said Dennis Vollmar, Chief Investment Officer at Montis Financial, in a report.

Oil prices spiked significantly in June 2025 during the Israel-Iran conflict when the U.S. struck Iranian nuclear facilities. At that time, there were also concerns that Iran might close the Strait of Hormuz, which ultimately did not happen. Prices retreated after the U.S. strikes and the subsequent de-escalation of conflict.