What Markets Do When the World Gets Uncomfortable

The Strait of Hormuz is effectively closed. Oil has hit US$126 a barrel. The S&P 500 is down. And gold, the asset many expect to rally during conflict, has just recorded its worst week since 1983.

None of this is following the usual script.

The Pattern We Expect

Historically, geopolitical conflict tends to follow a familiar market sequence. Capital moves to safety. Gold rallies. Equities fall. Oil spikes. Then, as the outlook becomes clearer, markets begin to settle.

The Gulf War, Iraq, and Ukraine all broadly followed that template.

This time is different.

What’s Actually Happening

Gold initially surged when strikes began on 28 February. It moved from around US$5,296 to above US$5,400 per ounce. Then it reversed, sharply.

Gold is now down more than 14% since the conflict began and recently posted its worst weekly fall since 1983, shedding roughly 11% in a single week.

Why? Three things are happening at once.

The US dollar is strengthening. Safe-haven flows are moving into the dollar rather than gold, weighing on demand for dollar-denominated commodities.

Investors are selling liquid assets to raise cash. Gold is one of the most liquid assets in the world. During sharp sell-offs, that liquidity can work against it. Investors sell what they can, not necessarily what they want to.

Interest rate expectations are shifting. Oil above US$100 is lifting inflation expectations, which in turn increases the likelihood that central banks keep rates higher for longer. The Fed held rates at 3.5–3.75% on 18 March. That competes directly with non-yielding assets such as gold.

The result is a short-term paradox. The very conditions that make investors want to own gold are also pushing its price lower.

Where Silver Fits into This

Silver has been hit even harder, down roughly 40% from its all-time high of US$121.62 on 29 January and now sitting around US$72.

But silver is not just a precious metals story. It is also an energy story.

The Strait of Hormuz crisis is accelerating something that was already underway. Countries are scrambling to reduce dependence on oil supply routes that can be disrupted overnight. Solar investment was already rising. Now it is becoming a strategic priority.

Solar panels need silver, and a lot of it. The solar sector consumed close to 200 million ounces in 2025, although that figure is expected to ease slightly in 2026 as manufacturers reduce silver content per cell. In 2014, solar accounted for 11% of silver’s industrial demand. By 2024, that figure had risen to 29%. Even with ongoing thrifting efforts, the direction is clear.

Add AI data centres, EVs and semiconductors, and industrial use now accounts for roughly 60% of all silver demand.

The Supply Side is the Quieter Part of the Story

The silver market has been in deficit for five consecutive years, with a sixth projected for 2026. The cumulative shortfall from 2021 to 2025 is approximately 820 million ounces, nearly a full year of global mine production.

Mine supply is growing at roughly 1% per year. Around 71% of silver is produced as a by-product of other mining, which means supply cannot simply be ramped up when prices rise. New production typically takes five to seven years to bring online.

Then there is China. As of January 2026, new export restrictions require government licences for silver exports, with strict criteria favouring large, state-approved producers with minimum annual output of 80 tonnes. China controls an estimated 60 to 70% of global refined silver supply. COMEX registered inventories are down more than 70% from their 2020 peak.

What the Data Says

This is not about making predictions. Markets are unpredictable, particularly during active conflict.

But the data is worth sitting with.

Gold has pulled back sharply despite the conditions that would usually support it. History suggests these dislocations do not always last. After the 2022 Ukraine invasion triggered a similar sell-off driven by rising rate expectations, gold went on to more than double over the following three years.

Silver has been hit by the same macro headwinds as gold, along with additional pressure from weaker industrial sentiment. But the structural forces driving silver demand, solar, AI and electrification, are not slowing because of conflict. If anything, the energy shock may be accelerating them.

Meanwhile, the supply picture is the tightest it has been in modern history.

None of this tells you what to do. But it does suggest that the short-term story and the structural story are two very different things.

This article is general information only and does not constitute financial advice. Always consult a licensed financial adviser before making investment decisions.