US-Iran talks breakdown spurs demand for safe haven: US dollar single-handedly supports safe harbor, gold plunges, inflation dilemma hits hard with a 3% decline.

As the US-Iran marathon-style peace talks broke down, the US announced the blockade of the Strait of Hormuz, causing global financial markets to plunge into severe volatility at the start of the new week. The US dollar surged significantly on safe-haven buying, while gold plummeted under the dual pressure of rising inflation expectations and a shift in central bank policies. Investors are now reassessing asset pricing logic in the face of geopolitical crises. Data shows that the US dollar strengthened against major currencies. Due to the limited exposure of the US mainland to imported energy price inflation, the US dollar has shown stronger safe-haven attributes in the current crisis. The euro fell 0.53% to 1.1663 against the US dollar, while the US dollar rose slightly against the Japanese yen by 0.1% to 159.43. The more risk-sensitive Australian dollar dropped by 1.1%, and the British pound also declined by 0.5%. Previously, the two-week ceasefire agreement reached by the US and Iran on April 7 briefly boosted market risk appetite, leading investors to sell off crude oil and buy back stocks and other risk assets. However, as the fragility of the agreement became evident, the market gradually reversed its previous optimistic trading positions. "Any optimism the market held about the peace talks has been completely dispelled funds are flowing into the US dollar for safety, oil prices are soaring, and other assets are being sold off," said Fiona Cincotta, senior market analyst at City Index. "On the other hand, markets sometimes overreact, particularly in an environment filled with uncertainty and unknown factors, making it difficult for the market to accurately price the situation." According to the latest statement from the US Central Command, the US military will officially start the blockade of the Strait of Hormuz on Monday morning at 10 am Eastern Time. The statement says that a blockade will be imposed on all maritime traffic entering and leaving Iranian ports, applicable to ships of all countries, but it specifically states that it will not hinder ships traveling to and from non-Iranian ports through the Strait of Hormuz. The strait carries 20% of global daily energy supply and has effectively been closed by Iran since the end of February when the conflict erupted. As a result, crude oil prices have surged by over 30%, and natural gas prices have also skyrocketed, escalating concerns about inflation resurfacing globally. At the same time, data released by the US Bureau of Labor Statistics last Friday showed the initial impact of the Iran conflict on the economy the inflation rate in March saw its largest increase in nearly four years, with gasoline prices accounting for nearly three-quarters of the month-on-month rise. Gold Rarely Plunges, Expectations of Central Bank Hikes Become Key Constraints Unlike past geopolitical crises where gold was sought after, gold prices faced intense selling this time. Gold futures fell by over 3%, dropping below $4630 per ounce and completely wiping out the gains from the previous week; silver also plummeted by 3.1% to $73.52 per ounce, while platinum and palladium followed suit. Analysts believe that the inflation risks brought about by the surge in energy prices are forcing the market to reassess central bank monetary policy paths. Investors expect major central banks such as the European Central Bank and the Bank of England to lean towards raising interest rates this year, a stark contrast to the market's general expectation of maintaining rates or cutting rates before the conflict. The prospect of higher interest rates directly suppresses gold, an asset that does not yield interest, making the US dollar a more attractive safe-haven tool in the current stage. Since the end of February, gold prices have fallen by about 11%, reflecting a shift in investors' defensive strategies amidst inflation and policy uncertainties.