When War Interrupts the Bullion Routes: Gold, Silver and the New Geography of Risk

The latest escalation in the Middle East has reminded the global bullion market of something it rarely confronts so directly: gold and silver are not only financial assets, but also physical commodities that must move through real-world infrastructure. When that infrastructure is disrupted, markets react in ways that go far beyond the usual “safe-haven” narrative.

Over the past week, the conflict surrounding Iran has sent shockwaves through the global precious-metals supply chain. Air traffic across large parts of the Gulf region has been severely curtailed after military strikes involving the United States and Israel and subsequent regional tensions. For the bullion trade, this is not a minor inconvenience. Dubai, the aviation hub at the center of the disruption, sits at the heart of the global gold logistics network.

The emirate has become one of the most important transit points for precious metals in the world. Roughly 20% of global gold shipments passed through Dubai last year. Gold mined in Africa is frequently flown there for refining before continuing on to Asian markets, while bullion from Europe often transits through the city on its way to India and China. In other words, Dubai functions as a crossroads linking producers, refiners and consumers across three continents.

When flights stop, that system quickly begins to seize up.

A Market Built on Passenger Aircraft

The global gold trade depends heavily on commercial aviation. Bullion is often transported as cargo on passenger planes, usually in shipments of up to five tonnes, worth as much as $830 million at current prices. These flights provide the regular, predictable transport capacity that keeps the global market functioning smoothly.

The sudden suspension of most flights across the Gulf region has therefore created an immediate logistical bottleneck. According to traders and logistics specialists, precious-metal shipments that were already prepared for departure are now stranded in airports. Some cargo that had already cleared customs must be formally withdrawn and rerouted — a process known in the trade as “frustrated exports.”

One logistics operator described the situation bluntly: “Nothing is moving anywhere by air right now.”

Even when flights resumed on a limited basis from Dubai, they were primarily reserved for urgent cargo such as perishables. Precious metals, despite their value, were not given priority.

Regional Price Distortions Begin to Appear

The impact of the disruption has already begun to show up in regional markets. Gold prices globally have softened slightly in recent days, falling around 3% to roughly $5,100 per ounce, after a remarkable rally earlier in the year. Yet in some local markets the price behavior has moved in the opposite direction.

India offers the clearest example. Late last week gold in the country was trading at a discount of around $50 per ounce compared with the London price — a common situation in periods of weak physical demand. By Monday, however, that discount had vanished as supply concerns intensified.

According to analysts at the World Gold Council, the sudden tightening in availability was directly linked to the interruption of shipments through the Middle East. When the logistical pipeline slows, physical markets react quickly.

The reason is simple: unlike financial contracts, physical gold cannot be delivered instantly across the globe. Delays in transportation translate into temporary shortages in certain regions, which can push local prices upward even if global benchmark prices remain stable.

India at the Center of the Disruption

Among major gold-consuming countries, India is likely to feel the disruption most acutely. Dubai has long served as the principal gateway through which bullion enters the Indian market. Customs data show that the United Arab Emirates was the second-largest gold exporter in the world in 2024, with India the main destination for those shipments.

This logistical dependence means that even relatively short interruptions can ripple quickly through the Indian supply chain. Traders say the market can probably adapt in the short term by rerouting shipments or drawing on existing inventories. But if air traffic restrictions persist for an extended period, the situation could become far more unpredictable.

One market analyst described the scenario succinctly: in the short run, the industry will “maneuver around the problem.” Over longer periods, however, “all bets are off.”

Silver Faces a Different Kind of Pressure

Interestingly, silver may be even more vulnerable to the current disruption than gold. Market insiders note that shipments of silver leaving London have been affected particularly strongly.

The reason lies partly in the structure of recent demand. Over the past year Chinese retail investors have poured heavily into silver, helping push inventories in the country to their lowest levels in a decade. When supply chains tighten under such conditions, the price impact can be more dramatic.

Silver has already experienced extreme volatility this year, driven by both industrial demand and speculative flows. The logistical shock from the Middle East adds another layer of instability.

A Market Already on Edge

The aviation disruptions come at a moment when the precious-metals market was already navigating a series of shocks. In recent months traders had been dealing with concerns about possible U.S. tariffs, which led to large volumes of gold being shipped to the United States and temporarily stored there.

Now another disruption has appeared — this time tied directly to geopolitical conflict.

Markets had already been grappling with sharp price swings earlier in the year. Gold surged to historic highs above $5,400 per ounce, driven by geopolitical tension, central-bank purchases and persistent investor demand. Even after the recent correction, prices remain almost 20% higher than at the beginning of the year.

The war around Iran has added a fresh dimension to this environment. On the one hand, geopolitical crises traditionally push investors toward gold as a safe-haven asset. On the other hand, the current conflict is also interfering with the physical mechanisms through which gold moves around the world.

In other words, the same event is influencing both the financial and logistical sides of the market simultaneously.

Why the Gold Rally May Not Last Forever

Historically, the geopolitical “premium” in gold prices tends to fade once the immediate shock passes. Even during prolonged conflicts, investors eventually become accustomed to the new reality and reduce their demand for safe-haven assets.

Many analysts believe that the same pattern could emerge again in the current situation. The base-case scenario in financial markets assumes that the conflict with Iran will remain limited in duration and geographic scope. If that assumption proves correct, gold prices may continue to fluctuate around recent highs without breaking dramatically higher.

However, the risk of escalation cannot be ignored. Iran’s strategic location — particularly its proximity to the Strait of Hormuz, one of the world’s most important oil shipping routes — means that any widening of the conflict could have significant consequences for energy markets and global trade.

Such developments would inevitably reverberate through the gold market.

The Long-Term Impact: More Uncertainty, Not Less

Regardless of how the current crisis evolves, its broader implications for the gold market may endure. Three structural forces are becoming increasingly visible.

First, geopolitical tensions are intensifying in ways that reinforce gold’s appeal as a hedge against systemic risk. The willingness of major powers to use economic sanctions, asset freezes and military force has changed how many countries and investors think about financial security.

Second, the possibility of political upheaval within Iran — whether through regime change or internal instability — introduces additional uncertainty into an already fragile region.

Third, the traditional role of U.S. Treasury bonds as the ultimate safe asset is facing new scrutiny. In recent market turbulence, flows into Treasuries have been more muted than expected. This dynamic indirectly strengthens gold’s position as an alternative store of value.

Taken together, these trends suggest that even if the immediate “war premium” in gold prices eventually fades, the broader investment case for the metal may remain intact.

A Reminder of Gold’s Physical Reality

The events unfolding in the Middle East serve as a powerful reminder that gold is not merely a line on a screen or a contract on an exchange. It is a tangible asset that moves through vaults, refineries, airplanes and trading hubs scattered across the world.

When one of those hubs suddenly goes offline, the effects ripple quickly through the system.

Dubai’s grounded flights have exposed just how interconnected the global bullion trade has become — and how vulnerable it can be to geopolitical shocks. Whether the disruption lasts days or weeks, the lesson for markets is clear: the price of gold is shaped not only by fear and speculation, but also by the physical routes through which the metal travels.