The war in Iran is already creating significant logistical disruptions to the gold market.
With its airspace closed and many flights grounded, gold stuck in Dubai is being sold at a discount.
The United Arab Emirates ranks among the world's top gold refiners and bullion exporters, primarily serving the Asian market. It is also a conduit for gold shipments from Switzerland, the UK, and several African countries. In 2024, around 1,392 tonnes of gold flowed through the UAE.
The UAE serves as something of a middleman in global gold trade. Mining companies typically refine ore into doré bars. These bars contain anywhere from 60 to 90 percent gold mingled with other metals. Doré bars are shipped to refineries in the UAE, where they are formed into bullion bars and jewelry-grade gold that is then exported back to Asian markets.
The UAE grew into a significant refining hub due to its strategic location between Asia, Africa, and Europe, large free trade zones that lower import/export barriers, and a massive bullion and jewelry sector of its own.
The ongoing war is hampering transporters, stranding tons of gold in the Middle Eastern country. Rather than holding on to it and paying storage fees, some dealers are opting to sell at discounts approaching $30 an ounce.
Gold is often shipped on commercial airline flights. With the war raging, officials have closed significant portions of the UAE’s airspace, and many flights have been cancelled. Even when planes are flying, a lot of dealers are reluctant to pay skyrocketing insurance rates and elevated shipping costs, especially given there is no guarantee of timely delivery. According to Bloomberg, dealers are also wary of moving gold overland to other airports in Saudi Arabia and Oman due to elevated risks and the complications of moving high-value cargo across other borders.
With gold bottled up in the UAE, other markets are reporting supply tightness. One of India’s largest gold dealers told Bloomberg, “Several cargo shipments have been delayed or stranded, leading to short-term tightness in the availability of physical bullion in India.”
India ranks as the world's second-largest gold market behind China.
Metals Focus analysts say that there is enough inventory in India to satisfy demand for the time being. Indian dealers imported large amounts of gold in January, boosting overall stocks. This is also typically a period of muted demand in India. However, a Metals Focus analyst told Bloomberg, “As of now, there is ample stock, but if this drags on for a few months, then there will be a problem.”
There are also reports of refiners in other countries struggling to source doré. According to Bloomberg, India’s largest refiner gets about 10 percent of its doré from Middle Eastern mines. The company’s CEO said supplies have been significantly disrupted. He told Bloomberg that contracts for new supplies from other regions come with a 60 to 70 percent increase in logistics costs.
We saw how disruptions in the flow of metal can impact markets when tariff worries sent tonnes of silver from London to New York last spring. When Indian demand peaked in the fall, it set off a significant silver squeeze that continues to ripple through the market.
While the gold supply isn’t as tight as silver (Silver demand has outstripped supply for five straight years), locking up tonnes of gold in the Middle East and the squeeze on refining capacity may well cause shortages in some markets, leading to local price spikes. The longer the war drags on, the higher the possibility of more serious disruptions. At best, we should probably expect elevated price volatility.
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