Escalating tensions in the Middle East are drawing renewed attention to the vulnerability of global energy supplies, with around 20% of the world’s oil passing through the Strait of Hormuz, one of the world’s narrowest and most strategically important shipping corridors.
Matthew Jones, Precious Metals Analyst at Britannia Bullion, said the latest developments should not come as a surprise to investors closely monitoring geopolitical trends.
“Many investors are reacting as if these developments appeared suddenly,” said Jones. “But for those watching the geopolitical landscape, the warning signs have been building for months.”
Markets vulnerable to disruption
The Strait of Hormuz connects the Persian Gulf with global shipping lanes and carries roughly 20 million barrels of oil per day, passing through just 21 miles at its narrowest point.
“This is arguably the most important energy chokepoint in the world,” Jones explained. “A very large portion of global oil supply depends on a very small stretch of water, which naturally makes markets extremely sensitive to any escalation in the region.”
The Middle East remains one of the most strategically complex regions globally, with overlapping rivalries involving regional powers and major international actors, including the United States and Iran.
Recent months have seen increased naval activity, drone and missile incidents, and growing threats to commercial shipping.
“Major geopolitical crises rarely appear overnight,” Jones said. “They usually develop gradually through escalating events. The risk of miscalculation rises sharply once tensions reach a certain point.”
Gold reacts before markets
Historically, gold has often strengthened before geopolitical crises dominate headlines.
“One of the interesting features of financial markets is that gold frequently begins moving before instability becomes widely recognised,” said Jones. “Gold doesn’t predict crises — it simply notices them before everyone else does.”
Gold has typically performed strongly during periods of geopolitical conflict, currency volatility, rising government debt, and financial stress — all of which are increasingly visible today.
Fragile financial backdrop
Jones also noted that these tensions are unfolding amid historic levels of global government debt.
“When geopolitical conflicts occur during periods of elevated debt, governments typically increase spending, widen deficits, and rely more heavily on monetary expansion,” he said. “That environment has historically supported gold.”
Advice for investors
While the exact path of geopolitical events is unpredictable, Jones said the situation reinforces the importance of diversification.
“Investors shouldn’t panic, but they should recognise that uncertainty is an inevitable feature of global markets,” he said. “Many choose to hold part of their wealth in assets outside the traditional financial system. Gold has served that purpose for centuries — not as speculation, but as protection.”
Looking ahead, he added:
“Geopolitical cycles often move slowly for years and then accelerate very quickly. The developments in the Middle East are a reminder that global stability can never be taken for granted, and markets may start pricing geopolitical risk more seriously again.”