Key Takeaways
- Gold prices surged as much as 1.6% toward $4,580/oz as optimism grew over a potential U.S.-Iran diplomatic deal to reopen the Strait of Hormuz.
- President Trump confirmed 13 U.S. service members were killed during the 68-day Operation Epic Fury, while claiming a "total victory" in Venezuela with zero American casualties.
- Israel is officially at war with Hezbollah, according to Prime Minister Netanyahu, who reported 600 terrorists killed in recent weeks and vowed to intensify strikes.
- Markets are monitoring Fed Chair Kevin Warsh, who was recently sworn in, as investors weigh falling oil prices against the potential for "higher-for-longer" interest rates.
Gold Rallies on Hopes for Strait of Hormuz Reopening
Gold bullion advanced significantly on Monday, rising as much as 1.6% toward the $4,580/oz mark. The rally was triggered by emerging signs that the United States and Iran are nearing a deal to end their two-month conflict and reopen the Strait of Hormuz. This vital waterway, which handles roughly one-fifth of the world’s oil and gas, has been largely shuttered, driving energy-led inflation concerns globally.
A weaker U.S. Dollar Index and a sharp 5% drop in crude oil prices provided additional support for the precious metal. Analysts noted that while the potential de-escalation is positive for market sentiment, gold's upside remains capped by a strong U.S. economic outlook and persistent inflation expectations.
Geopolitical Tensions: Operation Epic Fury and Venezuela
During a Memorial Day address, President Donald Trump commemorated the 13 U.S. service members lost during Operation Epic Fury, a military campaign launched in February 2026 to dismantle Iran's nuclear capabilities. Trump described the fallen as "guardian angels" who ensured Iran would never possess a nuclear weapon. He contrasted the Iranian conflict with the recent operation in Venezuela, which he labeled a "complete and total victory" achieved with zero U.S. casualties.
Despite the progress in U.S.-Iran negotiations, the Middle East remains volatile. Israeli Prime Minister Benjamin Netanyahu confirmed that Israel is at war with Hezbollah, stating that over 600 terrorists have been eliminated in recent weeks. Netanyahu vowed to "press the pedal even harder" in Lebanon, despite a surge in drone attacks targeting northern Israel.
Market Outlook Under Fed Chair Kevin Warsh
Financial markets are currently recalibrating expectations following the swearing-in of Kevin Warsh as the new Federal Reserve Chair. While falling oil prices could eventually cool inflation, analysts warn that Warsh may maintain elevated interest rates to ensure long-term price stability. This "higher-for-longer" stance continues to exert pressure on non-yielding assets like gold.
Traders are currently pricing in a high probability of a rate hike by December 2026, as the Fed navigates a complex "macro split" between easing energy costs and sticky core inflation. Technical analysts suggest that gold must consistently hold above $4,580 to negate current bearish trends and target the psychological barrier of $4,600/oz.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.