Gold fell sharply on Wednesday after President Donald Trump declared the interim peace deal with Iran “over”, sending spot prices down 1.4% to $4,049.92 per ounce, the lowest since 2 July. August gold futures on the Comex exchange dropped 2.3% to $4,059.80. The announcement, made during a press conference in Ankara, followed a new wave of US military strikes on Iran and the revocation of a licence that had permitted Tehran to sell oil. Brent crude futures surged more than 5% to $78.77 a barrel, while US oil jumped nearly 3%.

The spike in energy prices immediately revived fears of resurgent inflation, altering the outlook for US monetary policy. Traders marked up the probability of a Federal Reserve interest rate increase at the September meeting to over 63%, according to the CME FedWatch tool, up from roughly 57% a day earlier. Higher rates tend to weigh on non-yielding gold, and the dollar strengthened to its highest level in a week, making the metal more expensive for holders of other currencies. “Over the past 24 hours, there was a little bit of a scare again on the inflation front,” said Ilya Spivak, head of global macro at Tastylive. “Bonds came in lower, the dollar popped a little, gold pulled back.” UBS analyst Giovanni Staunovo noted that the focus now shifts to whether additional oil supply gets disrupted in the coming weeks.

Iran’s Revolutionary Guards claimed to have targeted US military bases in Bahrain and Kuwait in retaliation, while Washington justified its strikes after three tankers were hit by projectiles in the Strait of Hormuz. Analysts in London observed that much of the geopolitical risk premium was already reflected in prices, limiting safe-haven buying. Ewa Manthey, commodities strategist at ING, said the renewed tensions were “driving adjustments in positions rather than new safe-haven purchases”. Gold has fallen more than 20% since the conflict began in late February, and although it briefly recovered above $4,100 later in the session, it remained under pressure.

Investors now turn to the release of the Federal Open Market Committee minutes from its 16-17 June meeting, due later on Wednesday. The minutes are expected to offer clues on how the central bank under new Chair Kevin Warsh is weighing inflation risks against a labour market that showed unexpected weakness in recent data. Manthey said a test of the $4,000 level is possible if the unwinding of positions continues, but a sustained break below that threshold would likely require a larger-scale liquidation, higher real yields and reduced expectations of monetary easing.