In a typical economic scenario, high oil prices fuel inflationary expectations, driving investors toward gold and silver as hedges. FY26, however, defied this trend. While oil remained under pressure, precious metals climbed steadily throughout the year; now, as oil prices have nearly doubled in a single month and threaten further gains, gold and silver have entered a decline.
The war has resulted in Iran creating tensions in the Strait of Hormuz. Consequently, several countries now face acute shortages of fertiliser and gas — including LPG — hitting both households and commercial entities.
“Till the war began, the energy sector was an oversupplied market. OPEC producers were ready to step in to stabilise the market from rising crude prices due to Russian crude supply issues. But the (Iran) war has tilted the supply equation in favour of Russia again. The year as a whole, India has been a major beneficiary of buying cheaper oil from Russia,” said Gnanasekar Thiagarajan, founder of Commtrendz Risk Management Services.
Throughout much of FY26, Gulf nations faced pressure to support oil prices to protect realisations, even as alternative energy markets expanded rapidly. While inflationary expectations were moderating globally, including in India, the year was also marked by a US-led tariff war, but markets and economies eventually adapted to the trade tensions.
The Iran war has suddenly changed everything. Ajay Kedia, director of Kedia Advisory, said that while the 2008 oil shock saw prices hit $147 per barrel, that surge was driven by demand and financial flows rather than structural supply failures. In contrast, the current crisis has far deeper implications: It is unfolding against a backdrop of record global debt, fragile post-pandemic supply chains, and emerging market volatility. This makes the energy shock multi-dimensional — simultaneously impacting oil, gas, LNG, fertilisers, and freight. Crucially, it is no longer just high prices, but acute shortages and supply disruptions that are alarming users worldwide.
Not surprisingly, then, FY26 has ended with good returns for commodity investors. During the year, the London Metal Exchange Index increased 24.9 per cent, led by aluminium, copper, and tin. After averaging below $60 in the final quarter of 2025, WTI crude has rebounded to over $100, marking a year-on-year increase of more than 43 per cent. Brent crude has seen a similar rise, while the Indian basket of oil has surged over 60 per cent, exacerbated by the rupee's sharp depreciation. The Indian rupee fell nearly 10 per cent in FY26.
FY26 was also largely good for gold and silver investors, despite a steep correction in the final quarter. Gold and silver delivered global returns of 47.8 per cent and 117.2 per cent, respectively. In the Indian market, returns were even higher — reaching 64.6 per cent for gold and 128.1 per cent for silver — marking the highest gains in the 25-year data series.
The Iran war will decide the future of oil and precious metals. Nigam Arora, a US-based algorithm analyst and the author of the Arora Report, said, “If the war ends quickly, with the US decisively winning, expect gold and silver to go higher. Gold may approach prior highs in the near term. If the US declares victory without really winning, gold and silver will go higher, but are unlikely to approach the prior highs in the near term. If the Iran war drags out, then gold and silver will be very volatile in a wide range.” About crude, Kedia said: “The current oil shock is evolving beyond a commodity event into a full-scale macro disruption. If supply constraints persist, markets could transition into a prolonged phase of high inflation, weaker growth, and heightened volatility.”
“If Brent goes up to $130, it will put pressure on Iran and Israel/USA to engage in negotiations to resolve the conflict,” said Sidharth Sogani Jain, founder and chief executive officer of Blue Aster Capital BSC, a Bahrain-based investment firm and consultancy firm. At $130 levels and above, it will lead to significant pressure for global economies.
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