Iran war upends markets: Why gold, bonds and stocks are moving differently

In the wake of the West Asian crisis, markets are defying typical patterns as equities fall, bond yields rise and gold weakens, signalling a shift in investor behaviour amid oil shocks and rate concer

Since the beginning of the Iran conflict, global financial markets have struggled to find direction. Equity indices have largely remained in the red, with brief recoveries each time US President Donald Trump signalled a possible de-escalation, only to slip again as those signals were reversed.

 

This volatility has spilled across asset classes. Traditional safe havens like gold and silver are declining, while bond yields are rising instead of falling, and equities are under pressure, while cryptocurrencies are holding firm.

 

Different asset classes are reacting to different forces, including elevated oil prices, rising inflation expectations and shifting US Fed interest rate bets. Consequently, traditional safe-haven behaviour has not consistently held, and markets are instead adjusting to a more complex macro environment shaped by both conflict and policy uncertainty.

 

 

Why is gold falling despite geopolitical tensions?

 

Gold, which is usually the first refuge in times of conflict, has moved counter to its usual crisis playbook.

 

On Monday (March 23), gold dropped by over 8 per cent, reported Reuters, touching a four-month low after posting its biggest weekly fall in about 43 years last week, amid growing concerns over inflation after an escalating West Asian conflict boosted expectations of higher global interest rates. Gold prices fell by 6.3 per cent to $4,203.21 an ounce in spot markets.

 

The metal declined more than 10 per cent last week, the sharpest weekly decline since February 1983. The fall becomes more pronounced when seen against its earlier peak of roughly $5,594 in January, implying a drop of over 20 per cent.

 

The move reflects pressure from rising US bond yields and a stronger dollar, both of which increase the opportunity cost of holding non-yielding assets like gold, according to financial research firm MarketWatch, a subsidiary of Dow Jones & Company.

 

Is silver behaving any differently from gold?

 

Silver has largely followed gold’s direction but with greater volatility. Prices that were hovering near $88–$90 per ounce earlier in the month have corrected sharply, with declines of 8–9 per cent in a single session during the latest selloff.

 

Spot silver declined 6.1 per cent on Monday to $63.66 per ounce.

 

This sharper movement is consistent with silver’s dual role as both a precious and industrial metal.

 

The broader trend, according to Reuters, indicates that, like gold, silver is being driven less by geopolitical risk and more by financial conditions, particularly higher yields and profit booking after last year’s rally. 

 

How are US bond yields reacting to the Iran conflict?

 

Government bonds, another traditional safe-haven asset, are also behaving unusually. On March 23, the US 10-year Treasury yield touched eight-month peaks and rose to about 4.415 per cent, after climbing 44 basis points since the beginning of the Iranian conflict, according to a Reuters report. Rising yields signal falling bond prices, thus pointing to sustained selling.

 

The trigger, according to market analysts, is the impending inflation risk. Brent crude has moved above $100 per barrel since the war began, and with higher energy prices feeding directly into inflation expectations, markets have reassessed the path of interest rates. Instead of pricing in rate cuts, investors are increasingly factoring in the possibility of tighter monetary policy, pushing yields higher, Reuters said.

 

How are global stock markets responding to the Iran conflict?

 

Equity markets, on the other hand, have broadly weakened, although the scale of declines varies across regions.

 

In Asia, Japan’s Nikkei has fallen about 3.5 per cent, while South Korea is down 5.8 per cent and China’s CSI300 has slipped 2.4 per cent. In the US, the S&P 500 is down nearly 5 per cent year-to-date, while the broader Nasdaq has declined by about 6.9 per cent.

 

European markets are also under strain. The FTSE 100 has entered correction territory, falling more than 10 per cent from recent highs.

 

Meanwhile, Indian benchmarks have also seen corrections of over 10 per cent since the escalation began.

 

Are cryptocurrencies acting as a hedge during the Iran war?

 

However, cryptocurrencies are not moving in line with equities. Data shows Bitcoin gaining roughly 8 per cent over the month, even as stock markets have weakened. Prices earlier in March touched around $71,000, with gains supported by continued inflows and shifting investor positioning. On Monday, Bitcoin was trading at around $68,500, suggesting a fall from the earlier March peak but still in gain territory when compared with the pre-war period, where it had corrected by over 50 per cent from its all-time peak.

 

This suggests crypto is showing mixed behaviour. It is not acting as a pure safe haven like gold traditionally does, but it is also not fully tracking risk assets such as equities. Instead, it is responding to liquidity conditions and investor flows, which remain supportive despite broader uncertainty.