How do the latest developments in the US-Iran conflict affect global assets? Analyzing the transmission to gold, crude oil, US bonds, and the crypto market

June 5, 2026, the U.S. May Nonfarm Payrolls Report (Nonfarm Payrolls June 2026 Fed) is set to be released tonight Beijing time. Meanwhile, gunfire along the Iran-U.S. border has not fully subsided despite the April 8 ceasefire agreement—over the past week, both sides have engaged in multiple rounds of mutual attacks near the Strait of Hormuz.

This conflict, which began on February 28 this year, is penetrating the world's core asset pricing models in a way that "even a ceasefire cannot downgrade" it. For investors holding positions in gold, crude oil, U.S. Treasuries, or even cryptocurrencies, understanding this transmission chain is no longer an elective course in geopolitics but an essential one that determines portfolio returns.

The Spark Reignites: The "Ceasefire" at the Strait of Hormuz Is Essentially Dead

On February 28, 2026, the U.S. and Israel launched a joint military strike against Iran codenamed "Epic Fury," resulting in the assassination of Iran's top leader and the full outbreak of war. On April 8, a fragile ceasefire was reached, temporarily restoring passage through the Strait of Hormuz.

But the ceasefire did not truly cool the situation.

From June 1 to 3, the conflict escalated sharply again. U.S. military aircraft used "Hellfire" missiles in international waters of the Persian Gulf to incapacitate the oil tanker "LEXIE" heading toward Iran, citing repeated warnings ignored and disobedience by the crew. In response, the Iranian Islamic Revolutionary Guard Corps launched missile and drone strikes against U.S. military bases in Bahrain, Kuwait, and the UAE, including the Fifth Fleet headquarters.

Subsequently, the U.S. conducted airstrikes on communication facilities on Qeshm Island in Iran, and Iran further expanded its strikes to U.S. regional targets. Kuwait International Airport suspended operations, and airports in Bahrain and the UAE were temporarily closed.

As of June 5, sporadic clashes continue. U.S. President Trump explicitly drew a "red line" in an interview—if American soldiers are killed in Iran attacks, he will "very quickly" terminate the ceasefire agreement and re-enter a state of war.

On the political front, peace negotiations are also making little progress. Disagreements focus on three core issues: Iran’s nuclear program trajectory, ceasefire conditions on the Lebanon front, and control over navigation in the Strait of Hormuz. Iran has repeatedly announced its control over the Strait, emphasizing that "ships from hostile countries cannot pass," while the U.S. announced on the same day that it intercepted Iranian commercial ships and took countermeasures.

Several analysis agencies point out that Iran’s demand is to end "all fronts of war," including Lebanon, as a precondition for negotiations with the U.S. side. Conversely, the U.S. essentially demands Iran make comprehensive concessions on nuclear issues.

In short, the ceasefire is only a temporary respite; the market still needs to price in the risk of a longer-term conflict.

First Layer of Transmission: Crude Oil—The Largest Inflation Input Variable in 2026

Among all transmission pathways, crude oil is the starting point and the most heavily weighted variable.

The impact of the U.S.-Iran conflict on oil prices is amplified through two channels: first, direct military strikes leading to supply disruption expectations; second, blockage of passage through the Strait of Hormuz.

Current Price Levels: As of early June, Brent crude oil trades in the high range of $94–$95 per barrel, with U.S. West Texas Intermediate (WTI) around $92. Since the outbreak of war, U.S. gasoline prices have increased by approximately 45%.

Quantifying Supply Shock: HFI Research indicates that the current U.S.-Iran war has caused the largest recorded oil supply interruption. Even if both sides sign a peace agreement immediately, it will take a considerable amount of time to restore supply. Abu Dhabi National Oil Company estimates that restoring about 80% of the reduced output will take at least four months.

Assessment of Sustained High Levels: The International Energy Agency (IEA) data shows U.S. strategic petroleum reserves have fallen to about 357 million barrels, the lowest in nearly two years. This means that if supply tightens further, the buffer space is extremely limited.

It is worth noting that although oil prices remain high, they are still priced below the extreme scenario forecasts—where full-scale conflict drives Brent crude to $130–$150 per barrel. The market is still pricing in a "limited conflict" rather than "full-scale war out of control."

However, HFI Research warns that the market is "overly complacent": major U.S. stock indices are trading near all-time highs, but the market has not fully priced in the potential shock of high oil prices on the economy and assets. If oil prices stay elevated, it could create a pressure environment similar to the 1973 oil crisis—when the S&P 500 fell about 48% from peak to trough, taking roughly seven years to fully recover.

Second Layer of Transmission: Inflation—From Energy Prices to Overall Price Levels

Rising oil prices inherently exert inflationary pressure, but 2026’s particularity is that this pressure is not isolated.

Latest Inflation Data: U.S. CPI in April increased by 3.8% year-over-year, the largest YoY increase in about three years. The PCE price index, closely watched by the Fed, also rose 3.8% YoY in April, reaching the highest level since 2023.

Spreading Pathways: The increase in energy prices has already propagated through two secondary channels—first, rising costs of production materials like fertilizers and industrial equipment, which then transmit to a broader range of goods; second, higher transportation costs, directly reflected in retail prices.

Meanwhile, the April ISM Services PMI was 54.5, higher than the previous 53.6, indicating that service sector inflation remains sticky. JPMorgan has adjusted its policy expectations accordingly, now expecting the Fed to hold steady throughout 2026, with the next move possibly being a 25 basis point rate hike rather than a cut.

The IMF also urges the Fed to remain cautious in its rate decisions, forecasting that the timeline for U.S. inflation to fall back to the 2% target will be pushed from mid-2027 to the end of 2027. The IMF sees the inflation upside risks from energy shocks still present, with spillover effects from rising tariffs also intensifying.

Third Layer of Transmission: The Federal Reserve—"Higher for Longer" Turns into "No Cuts in 2026"

High oil prices combined with high inflation data have directly impacted market expectations for the Fed’s interest rate path in 2026. This adjustment is the most critical single-variable in the current multi-asset re-pricing.

Current Federal Funds Rate: The target range is 3.50%–3.75%. New Fed Chair Kevin W. recently took office at the White House and will preside over his first FOMC meeting on June 16–17.

The Complete Disappearance of Rate Cut Expectations: Before the U.S.-Iran war (early February), the rate market priced in about three rate cuts in 2026. But since the war erupted in late February and the Strait of Hormuz effectively closed, expectations have reversed 180 degrees. The interest rate swap market now fully prices in at least a 25 basis point hike by the end of 2026—marking the first time since the current rate hike cycle ended that markets have fully priced in a rate increase.

This means that if your asset allocation at the start of the year assumed a "2–3 rate cuts in 2026" environment, you now need to revise that premise entirely.

Reassessment of the Dot Plot: The Fed will update its quarterly economic projections and dot plot at the June FOMC meeting. The current core scenario is that the March dot plot’s forecast of "one rate cut" in 2026 will likely be removed this month, and the rate cut expectations for 2027 may also evaporate. Some analysts believe the new dot plot might even tilt toward a rate hike scenario.

Shift in Officials’ Stances: Fed Governor Christopher Waller recently stated that the central bank should clearly signal that "the next rate move is more likely to be a hike than a cut." Waller’s comments caused short-term Treasury yields to rise sharply, with the two-year yield climbing to 4.14%—the highest since February 2025.

San Francisco Fed President Mary Daly took a more neutral stance, saying that current monetary policy is in a "good place," but given economic uncertainties, the Fed will not give clear guidance on future rate paths.

Fourth Layer of Transmission: U.S. Treasuries and the Dollar—Rising Yields and Rate Hike Expectations Resonating

The abrupt shift in Fed policy expectations directly transmits to the U.S. Treasury yield curve and the dollar exchange rate.

U.S. Treasury Yields Rise: Since the outbreak of the U.S.-Iran war (late February), the 10-year Treasury yield has risen about 65 basis points, reaching 4.60% in early June, the highest since early 2025. The 2-year yield has increased over 70 basis points from pre-war lows, surpassing 4%, also at its highest since early 2025.

The yield curve’s shape indicates the market is pricing a "higher for longer" or even "higher still" interest rate path. The bond market’s logic has shifted from betting on rate cuts to "inflation trades"—yields across all maturities are rising in unison, reflecting expectations of a higher long-term inflation median.

The Logic of a Stronger Dollar: When the Fed maintains high rates or even hikes further, the dollar benefits from sustained interest rate differentials. For portfolios holding non-dollar assets or cryptocurrencies, this means dual pressures—valuation pressure (higher discount rates on denominators) and exchange rate pressure (a stronger dollar’s adverse effect on assets priced in other currencies).

Fifth Layer of Transmission: Gold—A Super Bull Market Driven by Triple Factors

Against the backdrop of rising inflation from the U.S.-Iran conflict, delayed (or even reversed) Fed rate cuts, gold’s performance appears seemingly contradictory—though it is suppressed by high real interest rates, its dual support from geopolitical safe-haven demand and central bank gold purchases is dominating its price trend.

Current and Target Prices: Gold is currently around $4,447 per ounce, with fluctuations this year—peaking near $5,300 in 2026 before retreating on market adjustments.

Major investment banks’ forecasts for 2026 gold prices are concentrated in a high range. According to a Reuters survey, the average forecast from 31 institutions is $4,916 per ounce, significantly up from $4,746 previously. Morgan Stanley maintains a year-end target of $5,200. Goldman Sachs raised its target to $5,400, UBS projects about $5,900, and JPMorgan and Wells Fargo are even more optimistic, reaching $6,300.

Dissecting the Triple Drivers:

1. Geopolitical Safe-Haven: The World Gold Council notes that ongoing geopolitical tensions remain a core factor supporting gold demand in 2026. As the U.S.-Iran conflict escalates repeatedly, gold as the "ultimate safe asset" continues to see increased institutional allocation.

2. Central Bank Gold Purchases: In March 2026, China’s central bank added 5 tons of gold, continuing a trend of reserve diversification. In 2025, global central banks bought about 850 tons of gold, down from over 1,000 tons annually in 2022–2024 but still well above historical averages. The World Gold Council’s survey indicates that up to 95% of reserve managers expect central bank gold reserves to continue increasing over the next 12 months.

3. Inflation Hedge: With oil prices pushing U.S. CPI back to 3.8%, gold’s appeal as a traditional inflation hedge is strengthening.

Note that TD Securities recently lowered its Q3-Q4 gold price forecast by 3% to $4,550 per ounce, mainly due to market pricing in Fed rate hikes, which somewhat suppresses gold. However, most institutional pricing logic still sees central bank structural purchases and safe-haven demand as sufficient to offset the negative impact of rising rates.

Final Destination of Transmission: Cryptocurrencies—Liquidity Expectations and Risk Appetite Under Dual Tests

Cryptocurrencies occupy a relatively unique position in this multi-asset re-pricing. They benefit from the narrative of "digital gold" but are highly sensitive to Fed policy expectations in terms of liquidity.

Current BTC Price: Bitcoin is around $62,846, down about 10.73% over the past 30 days and down 33.74% over the past year. Ethereum is around $1,701, also under pressure.

Two-Layer Analysis of Transmission Mechanisms:

1. Liquidity and Rate Expectations: When market expectations shift from "rate cuts in 2026" to "possible rate hikes in 2026," risk asset valuation anchors face a comprehensive re-evaluation. Higher risk-free rates mean higher capital costs, directly pressuring high-volatility assets. Fully priced-in rate hikes for 2026 imply that this downward pressure will persist in the short term.

2. Dollar and Risk Appetite: As the dollar strengthens under hawkish Fed expectations, dollar-denominated crypto assets become less attractive in global portfolios. Meanwhile, escalating geopolitical conflicts also suppress risk appetite—during conflicts, funds tend to shift from high-volatility assets like BTC to safe havens like gold and Treasuries.

The Decisive Role of the May Nonfarm Payrolls: The upcoming May employment report will be a key variable for the Fed’s next policy move. Consensus expects about 85k new jobs, with the unemployment rate holding at 4.3%, average hourly earnings up 0.3% MoM and 3.4% YoY.

Different data scenarios and their asset impact logic:

• Significantly Weak (far below expectations, unemployment rising): Eases rate hike expectations, weakens the dollar, and liquidity easing prospects could boost crypto assets temporarily.
• In Line (around 70,000–90k new jobs): The Fed remains on hold, focus shifts back to geopolitics and inflation, and cryptocurrencies may trade sideways.
• Significantly Strong (far above expectations, unemployment falling): Rate hike expectations intensify, dollar strengthens, and high valuations in risk assets like crypto face downward pressure.

Specifically, if the data shows weakness, markets may briefly price in rate cuts and rally, but such weakness could also raise recession fears, prompting risk-off flows from BTC and other high-vol assets.

Risk Warning

Investors should recognize that the core uncertainty in current multi-asset pricing is not a single data deviation but the intersection of three forces:

First, the trajectory of Middle East conflict. Fragile ceasefires could break at any diplomatic misfire, and if U.S. soldiers are harmed, Trump’s clear stance to "quickly" resume full-scale war could push oil prices beyond $150, causing a fundamental shock to global inflation. HFI Research warns that sustained high oil prices could trigger a double whammy of stock and bond declines similar to the 1970s.

Second, the timing of the Fed’s policy shift. A tail risk not yet fully priced in is: if inflation remains persistently above 3.5% driven by oil prices, and employment remains resilient, will the Fed under Waller’s leadership really be willing to fully eliminate "rate cut" signals at the first meeting? Will the dot plot switch directly from "one cut" to "one hike"? If so, the valuation adjustment could be much larger than current expectations.

Third, the tension between nonfarm data and inflation. The current 4.3% unemployment rate and 3.8% CPI form a dilemma for policymakers—labor markets remain tight, but price pressures are well above target. This "stagflation" tendency undermines the traditional Fed reaction function: it cannot find a clear basis to pivot between rate hikes and cuts.

This implies that asset allocation in the second half of 2026 must adapt dynamically in a higher-volatility environment, closely monitoring every geopolitical twist and every subtle change in Fed language.

Conclusion

The asset revaluation triggered by the U.S.-Iran conflict is fundamentally a systemic restructuring—not just short-term volatility driven by geopolitics. It involves "energy shocks—re-inflation of inflation—interest rate path reversal—dollar re-strengthening—risk asset compression." When oil prices stay elevated due to Hormuz risk premiums, inflation expectations are forced higher, and the Fed’s policy framework shifts rapidly from a "rate-cut cycle" to a "high-rate or even tightening" path, causing a shift in global asset valuation anchors. In this process, gold, caught between safe-haven demand and real interest rates, redefines its historical valuation range; U.S. Treasuries steepen their yield curve; and cryptocurrencies, under liquidity contraction and risk aversion, enter a phase of high volatility re-pricing.

What truly matters is not the rise or fall of individual assets but the re-strengthening of cross-asset correlations—when inflation and geopolitical risks rise in tandem, traditional "stock-bond hedging" and "risk diversification" assumptions are weakening, and portfolio management is returning to a macro factor-driven framework. The next phase’s core variables are whether the Fed is forced to make more aggressive trade-offs between growth resilience and inflation pressures, and whether Middle East tensions escalate from "manageable conflict" to "energy supply shocks." Until these paths are clarified, all assets remain in a process of re-pricing.