Gold climbed toward $4,120 per ounce as investors reacted to a sharp rise in energy prices amid growing geopolitical risk in the Middle East. Brent crude jumped more than 4%. It topped $104 a barrel, raising concerns about energy-driven inflation and its effect on global growth.
Reports challenged assumptions that the U.S. would avoid escalating conflict with Iran before the November mid-term elections. Recent Houthi rebel attacks on Saudi Arabian airports added to concerns about the vulnerability of regional energy infrastructure and increased the geopolitical risk premium in oil markets.
Inflation fears supported gold, but a strong U.S. dollar and rising Treasury yields limited its gains. The U.S. 10-year yield rose to 5.35%. The oil price surge also fueled expectations that the Federal Reserve may maintain its hawkish stance to combat inflation.