Gold Should Have Exploded When the Iran War Started: Here’s Why It Did Not

TLDR:

• Gold spiked to $5,390 on February 28 but dropped 4% by March 4, settling at $5,093 after strikes.
• Oil surged 13% and jet fuel jumped 140% while gold gained only 2.3% since the Iran war began.
• Dollar strength from inflation expectations historically outbids gold in phase one of energy crises.
• Goldman Sachs targets $6,300 gold by end-2026, leaving a $1,207 gap the market has not yet priced.

Gold should have exploded when the Iran war started, but it did not. That unexpected restraint is now the central question driving institutional analysis worldwide.

Since US-Israeli strikes on February 28 killed Iran’s Supreme Leader and closed the Strait of Hormuz, gold gained only 2.3 percent.

Brent crude surged 13 percent. Jet fuel jumped 140 percent. For seasoned market watchers, understanding why gold held back matters far more than the price itself.

Why Gold Stayed Quiet While Every Other Crisis Asset Moved

The war began with dramatic force. US-Israeli strikes destroyed twenty Iranian warships within 48 hours and closed a critical global shipping lane.

Gold briefly spiked to $5,390 intraday on February 28. Yet by March 4, just six days into the largest Middle East military campaign since the Gulf War, gold had dropped roughly 4 percent in a single session.

The answer to gold’s restraint sits in the dollar. An oil spike does not immediately trigger a safe-haven gold bid. Instead, it activates the inflation expectation channel, which strengthens the dollar and tightens real yields. That is the one macro environment where gold historically underperforms other assets.

Analyst Shanaka Anslem Perera framed it plainly in a widely circulated post. “This is not gold failing,” he wrote, describing gold as being temporarily outbid by the dollar during an inflation shock’s opening phase. The dollar roared following the oil move, and gold waited. That sequence is not random — it is structural.

The Fed now faces three competing pressures at once. Oil-driven inflation calls for rate hikes. A war-related growth shock calls for cuts. War financing calls for monetization.

Markets read the inflation signal first and bought dollars instead of gold. That is why the numbers look the way they do today.

Understanding the Two-Phase Pattern That Explains What Comes Next

Every major energy-driven geopolitical crisis in modern history has followed the same two-phase sequence. Phase one sees the dollar strengthen on inflation expectations, leaving gold behind.

Phase two begins when sustained economic damage becomes visible, recession probability rises, and markets shift from pricing inflation to pricing monetary debasement.

In 1973, that second phase took about six months and delivered gold gains of 73 percent. The 2022 Russia-Ukraine war compressed the timeline because the conflict stayed geographically contained. In 2026, the duration of Hormuz disruption determines when and whether phase two arrives.

Goldman Sachs has already moved its end-2026 gold target to $6,300, conditioned on prolonged Hormuz closure. Gold sits at $5,093 today. That leaves a $1,207 gap the market has not yet priced.

According to Perera, that gap exists because the market is still betting on a short war while the evidence points toward a longer one.

The $5,000 support level is the technical number every trader is now watching. The Fed’s March 18 meeting and the UN Security Council session on March 10 are the next key events.

If support holds through both, the base for phase two remains intact. Gold did not explode when the Iran war started — but the structure building beneath it suggests the delay, not the direction, is what analysts got wrong.

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