Gold and Crude Soar as Israel Strikes Iranian Nuclear Facilities, Top Military Official Assassinated

Gold and oil prices spiked sharply after Israel launched airstrikes on Iranian nuclear and military facilities, accompanied by the assassination of Iran's Armed Forces Chief of Staff Mohammad Bagheri. The attack came hours after U.S. President Trump hinted at imminent military action, with Tehran reporting consecutive explosions as Israeli forces codenamed the operation "Strength of a Lion."

Update: The Islamic Republic News Agency (IRNA) reported that Mohammad Bagheri, Chief of Staff of the Iranian Armed Forces, is still alive and currently at a command center.

Escalating Tensions: Attack Triggers Market Volatility

Israel's Air Force targeted dozens of sites linked to Iran's nuclear program and military infrastructure, claiming Iran possessed enough enriched uranium to build multiple bombs "within days," justifying the strike as a response to "imminent threats." The move sent WTI crude futures surging 8%, spot gold above $3,422/oz, and Nasdaq futures down nearly 2%.

Looking at the recent overall performance of the gold market, gold prices have witnessed a substantial increase in 2025, with a year-to-date gain of over 25%. Previously, gold prices retreated due to factors such as the U.S. non-farm payrolls report showing a continuously strong labor market. However, even before the news of the Israel-Iran conflict emerged, the gold market was already supported by various factors. For instance, the instability of the global economic environment, the unexpected contraction of the U.S. service sector, sluggish employment data, and the impact of President Trump’s new tariff policies all contributed to the upward momentum of gold. Additionally, tensions in major power relations, progress in EU-U.S. trade negotiations, and the rising market expectations for Federal Reserve interest rate cuts have also enhanced the investment attractiveness of gold.

The crude oil market, on the other hand, has been caught in a complex web of bullish and bearish factors. On the supply side, the OPEC+ production increase plan and Saudi Arabia’s strategic price cuts pose short-term negative impacts. On the demand side, data from the U.S. Energy Information Administration (EIA) showed that, as of the relevant week, the increases in U.S. gasoline and distillate inventories exceeded expectations, reflecting weakening refined oil demand in the world's largest economy. The Israeli attack on Iran, considering Iran's significant position in global crude oil supply, has intensified market concerns about potential supply disruptions, thereby driving the sharp short-term surge in oil prices.

Israeli Defense Minister Israel Katz declared a nationwide state of emergency for inland frontlines, warning: "Iran is expected to launch missile and drone attacks on Israeli civilians. This preemptive strike is necessary to neutralize existential risks."

U.S. Diplomatic Tensions

Secretary of State Marco Rubio said it was Israel’s “unilateral action against Iran.”

“We are not involved in strikes against Iran and our top priority is protecting American forces in the region. Israel advised us that they believe this action was necessary for its self-defense. President Trump and the Administration have taken all necessary steps to protect our forces and remain in close contact with our regional partners. Let me be clear: Iran should not target U.S. interests or personnel,” Rubio said.

Earlier, Trump warned of "large-scale conflict in the Middle East," as Iran accelerated nuclear activities in response to an IAEA resolution censuring its non-compliance. " I don’t want to say imminent, but it’s something that could very well happen," Trump told reporters, while maintaining preference for a peaceful solution.

Regional Risks and Strategic Fallout

Iran threatened retaliation against both Israel and U.S. bases in the region. The State Department authorized diplomatic evacuations from Iraq, while the Pentagon approved family departures for troops in the Middle East. Analysts note the strike disrupts fragile diplomatic efforts, with gold's surge reflecting safe-haven demand amid fears of regional war.

"The market is pricing in systemic risks of oil supply shocks and prolonged Middle East instability," said JP Morgan strategist Hussein Sayed. "Gold's breakout above $3,400 signals investors are bracing for extended volatility."

Historical Parallels and Policy Implications

The strike echoes Israel's 1981 Osirak nuclear plant attack, but with higher stakes: Iran's advanced enrichment capabilities and regional proxy networks. U.S. sanctions have already cut Iranian oil exports by 60%, but the strike raises risks of Strait of Hormuz disruptions, which handles 20% of global oil trade.

As tensions escalate, the conflict underscores the fragility of global energy markets and the premium investors now place on safe-haven assets. "This is a textbook case of geopolitics overriding fundamental analysis," noted Bloomberg Intelligence, predicting gold could test $3,600/oz if Iran executes retaliatory attacks.