Gold prices fell to a two-month low, pressured by renewed conflict between the United States and Iran, which threatens to derail peace talks and sustain inflation risks, alongside a strengthening US dollar. On May 28th, gold prices dropped as much as 2%, nearing $4,365 per ounce. A US official stated that American forces had struck military bases and other targets near the Strait of Hormuz. According to Iranian media, the Islamic Revolutionary Guard Corps responded by attacking the US military bases from which the strikes were launched. Additionally, Kuwait's air defense reported it was responding to missile and drone threats, highlighting the risks to negotiations aimed at ending the Middle East conflict. These events occurred just hours after US President Trump expressed dissatisfaction with the talks with Iran, dashing expectations of an imminent breakthrough. President Trump did not specify what measures the US would take to ensure freedom of navigation through the Strait of Hormuz, a key sticking point in resolving the Iran conflict. This vital energy chokepoint remains almost entirely closed, causing a surge in oil product prices and dealing a blow to the global economy since late February. The US also imposed new sanctions to prevent Tehran from profiting from vessels transiting the Strait of Hormuz, underscoring the fragility of recent diplomatic progress. In recent days, US Treasury prices had risen on market optimism for a deal to end the conflict. On Thursday, Brent crude oil prices surged as much as 4.2% to around $98 per barrel, exacerbating inflation risks and raising market expectations for Federal Reserve rate hikes. Even if a peace agreement is reached, rising energy prices could continue to fuel inflation, forcing central banks to maintain higher interest rates for longer rather than cutting rates as many had anticipated before the Iran conflict. In this context, US Treasuries declined for the first time in six sessions. During Thursday's Asian trading, the yield on the 10-year US Treasury note rose 5 basis points to 4.53%, following a cumulative drop of nearly 20 basis points over the previous five sessions. The yield on the 2-year US Treasury note increased by 4 basis points to 4.07%. Ken Crompton, Head of Rates Strategy at National Australia Bank Ltd., suggested that reports of Iranian attacks on US military facilities were likely a primary driver of this shift. He stated, "This has dampened demand for bonds to some extent and pushed up oil prices and bond yields. We remain broadly bearish on long-term bonds: many markets face fiscal pressure, the risk of inflation expectations becoming unanchored is increasing after five years of above-target inflation, and the Federal Open Market Committee (FOMC) is increasingly leaning towards rate hikes." Concerns over rising oil prices also pressured government bonds in the Asia-Pacific market on Thursday. The yield on Australia's 10-year bond rose by 6 basis points, while New Zealand's 10-year bond yield increased by 2 basis points. Japan's 10-year bond yield edged up by 0.5 basis points. Federal Reserve Governor Lisa Cook stated on Wednesday that inflation is moving in the wrong direction and she is prepared to raise rates if this trend persists. Fed Vice Chair Philip Jefferson also warned that inflation risks remain skewed to the upside, noting he is closely monitoring whether rising energy costs from the Iran conflict will dampen consumer spending. Overnight index swaps indicate a more than 70% probability of a Fed rate hike by the end of 2026. In a higher interest rate environment, precious metals typically underperform as they do not pay interest, while a stronger US dollar makes them more expensive for many buyers. Since the Iran conflict erupted in late February, the precious metal's price has fallen over 17%, nearly erasing its year-to-date gains. Signals from the options market show traders are scaling back bullish convictions on gold and expecting reduced market volatility ahead. The implied volatility for the SPDR Gold Trust, the world's largest gold ETF managed by State Street, a key gauge of expected future price swings, has fallen sharply. Furthermore, the speculative or hedging premium for the fund's price increase over the next three months is near its lowest level since last December. Justin Lin, Investment Strategist at Global X ETFs Australia, commented, "Traders are losing confidence in safe-haven demand; they have better uses for their funds," such as investing in some high-profile listed companies. He added that if oil prices move higher, gold could find support in the $4,000 to $4,250 range. At the time of writing, spot gold was down 1.8% at $4,374.11 per ounce. Silver fell 3.6% to $71.98 per ounce. Platinum and palladium prices also retreated. The Bloomberg Dollar Spot Index rose 0.3%, marking its third consecutive session of gains.