Oil and gold swing on fresh de‑escalation headlines as conflict enters week 12

Middle East conflict keeps oil elevated as inflation risks weigh on gold

The Middle East conflict has now dragged into its 12th week, and its influence continues to ripple with undeniable force across global markets.

Persistent disruption to oil flows through the Strait of Hormuz has kept energy prices stubbornly elevated, feeding inflation fears, pushing up bond yields, and supporting a firmer United States (US) dollar. All of which, of course, has weighed heavily on the price of gold.

In this note, we dive into the latest developments around the conflict and what they mean for the outlook of West Texas Intermediate (WTI) crude oil and gold.

Crude oil

WTI crude oil (July) finished higher overnight at $102.49 (+1.31%), easing from an intraday high of $105.21 reached earlier in the session. This modest retreat followed a session filled with what appeared to be de‑escalatory headlines, coming after the sharp escalation witnessed over the weekend. However, traders have become well accustomed to this cycle of weekend tension followed by Monday talk of progress. Consequently, the reaction to these de‑escalation efforts has been relatively muted compared to the early stages of the conflict.

The bulk of the pullback came after President Trump announced he had postponed a planned US military strike on Iran, which was scheduled for Tuesday, following direct appeals from the leaders of Saudi Arabia, Qatar and the United Arab Emirates (UAE). Trump stated that ‘serious negotiations are now taking place’, and Gulf officials expressed confidence that a deal preventing Iran from acquiring nuclear weapons could still be reached.

Frankly, we are not overly convinced about the near‑term prospects of a deal and suspect that the weekend’s fresh drone attacks on the UAE and Saudi Arabia were the primary motivation behind the pause.

While Gulf states have been steadily improving their air defences during the five‑week ceasefire – reportedly incorporating Ukrainian anti‑drone systems – the strike on an external generator at the Barakah nuclear power plant showed that Iran is also adapting its tactics by shifting its point of attack, and that if the US and Israel launch new strikes, Gulf states’ energy infrastructure remains vulnerable.

WTI crude oil technical analysis

Technically, the pullback from the 9 March high of $119.48 over the past two‑and‑a‑half months continues to look corrective. The correction appears to be tracing out a five‑wave ‘abcde’ Elliott Wave pattern.

A sustained break and close above $108.40 would provide the first strong signal that the correction is complete and the broader uptrend has resumed. That would open the door for a retest of the March high at $119.48, with scope for further gains toward the March 2022 peak near $130.50.

Only a decisive break below support in the mid $70s would invalidate the bullish outlook and shift the picture toward a more neutral view.

WTI crude oil daily candlestick chart

Gold

After a remarkable rally throughout the second half of 2025 and into the opening months of 2026, gold effectively ‘hit the skids’ in March, losing 11.57% for its worst month since October 2008. This trend has continued, with a second consecutive monthly fall in April, and as things stand, gold is now on track for another down month in May.

Gold’s fortunes remain closely tied to developments in the Middle East. On the surface, it is worth noting that an end to the conflict could prove a double‑edged sword. On one hand, a lasting peace agreement would remove the geopolitical safe‑haven bid that supported gold’s rally in the lead‑up to the conflict.

On the other hand, a genuine de‑escalation would allow for lower oil prices and ease inflation fears, resulting in lower bond yields, a weaker US dollar, and reduced expectations of the next move from the Federal Reserve (Fed) being a rate hike. These factors are supportive for gold.

Another key driver is the surge in participation from retail traders in the precious metals market, drawn in by the sharp rally to the $5602 high earlier this year. This has seen gold trade more like a risk asset than a traditional safe haven – similar to the Nasdaq 100 or the S&P 500, but without the upside exposure to artificial intelligence (AI).

Gold technical analysis

We turned bullish on gold in early April after it reached the $4200 wave‑equality target, having held a bearish view for much of March following its rejection of resistance near $5419.

Since then, the metal has staged a tentative recovery, climbing to a mid‑April high of $4891 before pulling back to a seven‑week low of $4480 overnight.

As long as gold holds support near $4350, where the 200‑day moving average (MA) currently sits, we remain constructive on the longer‑term outlook. The target is a return to the $4900 region, with a decisive break above the $4900 - $5000 resistance zone opening the door for a retest of the all‑time high at $5602.

A sustained break below the 200‑day MA at $4350 would negate the bullish bias and warn of a retest of the March low at $4098.

Gold daily candlestick chart

• _{Source: TradingView. The figures stated are as of 19 May 2026 Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}