Commodities rise amid increasing geopolitical tension.

Brent is trading above $90 a barrel and gold is hitting a new ATH as escalating tensions in the Middle East prompt a major reassessment of geopolitical risks. Fears of a wider regional conflict are growing as Israel braces for a response from Iran over the Israeli strike on the Iranian embassy in Syria. Despite today’s support for the dollar from the stronger-than-expected NonFarm Payroll Release, commodities such as oil, gold and silver are up.

The price of gold is highly sensitive to geopolitical conflicts, as it is considered a kind of safe haven of value, meaning that investors tend to put their money into gold in times of uncertainty, instability and geopolitical crisis. When geopolitical tensions increase, risk sentiment decreases and investors become more cautious. They fear that potential conflicts could negatively affect financial markets and economies around the world. As a result, investors are seeking refuge in assets such as gold, which is perceived as one of the safest store-of-value investments.

-Bloomberg Commodity Index hit its highest levels since the beginning of the year

Geopolitical tensions in the Middle East further supported oil prices, which were already enjoying a headwind from production cuts and stronger-than-expected demand. The conflict between Israel and Hamas has led to Houthi attacks on cargo ships in the Red Sea, raising transport costs, but has so far not escalated into a full-scale war in a region that accounts for about a third of the world’s supplies. Negotiations for an end to hostilities between Israel and Hamas, which could lead to the release of hostages held in Gaza, remain at a standstill.

Earlier this week, OPEC+ opted to keep production cuts in place for the first half of the year, meaning output curbs of around 2 million barrels per day will remain in place. Global oil production further declined following Mexico’s decision to curb oil exports.