Analysis of the Mechanisms by Which Geopolitical Conflicts Impact Global Energy Markets and Safe-Haven Asset Prices

Based on collected professional materials, I will systematically analyze the mechanisms by which geopolitical conflicts impact global energy markets and safe-haven asset prices for you.

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Geopolitical conflicts as major risk factors affecting global financial markets have intricate and complex transmission mechanisms. The “12-Day War” between Israel and Iran that broke out in June 2025 once again confirmed the effectiveness of this transmission mechanism: Brent crude oil price surged from $65.18 per barrel to $78.64 per barrel, with a daily amplitude of up to 8.03%, and then plummeted 4.79% after a ceasefire agreement was reached[1]. This case fully demonstrates that geopolitical risks have formed a tight “second-level response” relationship with asset prices.

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The

of geopolitical conflicts on the energy market is reflected on the supply side. When conflicts occur in major oil-producing countries or regions, the risk of crude oil supply disruptions directly drives up prices. Historical experience shows that this transmission mechanism has significant effects:

• 1973 Arab Oil Embargo
  : Triggered the first oil crisis, with oil prices rising nearly 300%
• 1979 Iranian Revolution
  : Global crude oil production plummeted, and oil prices doubled
• 1990 Gulf Crisis
  : Iraq invaded Kuwait, and oil prices once exceeded $40 per barrel[1]

However,

. The current global oil and gas system has established a multi-level structural buffer mechanism:

Buffer Mechanism	Specific Performance	Effect
Supply Diversification	Non-OPEC production accounts for 60% (U.S., Brazil, Guyana, etc.)	Reduced impact from unrest in a single region
Strategic Petroleum Reserves	Major consumer countries have established large-scale reserve systems	Mitigates short-term supply-demand gaps
Information Transparency	High-frequency disclosure of real-time inventory and shipping tracking data	Weakens the “expectation panic” effect
Mature Financial Instruments	Derivatives such as futures and options provide risk hedging	Reduces stampede behavior in the spot market[2]

The Strait of Hormuz is the “chokepoint” of global energy transportation. According to data from the U.S. Energy Information Administration, approximately

are shipped through the strait every day, with 84% flowing to Asian markets[1]. Therefore, any talk of a potential closure of the strait will immediately trigger market panic.

During the 2025 Israel-Iran conflict, the Iranian Parliament passed a resolution to “close the Strait of Hormuz”; although it was not ultimately implemented, it already pushed Brent crude oil prices up to $78.64 per barrel[1]. This indicates that the geopolitical risk premium of transportation corridors has been embedded in the market price formation mechanism.

Geopolitical conflicts are often accompanied by sanction measures, which in turn trigger the reconfiguration of global energy trade flows. The European natural gas market after the

is a typical case:

• The EU imposed an embargo and price cap sanctions on Russian oil
• Russia redirected its energy exports to the East, increasing natural gas transmission via China-Russia pipelines
• The U.S. became an important liquefied natural gas supplier to Europe
• Global natural gas prices experienced multiple rounds of pulse-like increases[3]

This trade flow restructuring does not simply manifest as a “reduction in global supply volume”, but instead gives rise to a complex set of exclusion, substitution, and compliance mechanisms.

to become the dominant variable in energy investment decisions.

The impact of geopolitical conflicts on market psychology is particularly significant. Kaneva, Global Head of Commodities Strategy at JPMorgan Chase, pointed out that the term of modern energy contracts has been significantly shortened from the previous

[1]. This change has made the market more sensitive to geopolitical risks:

1. Short-Term Contracts Amplify Volatility
   : All parties avoid long-term commitments, and any geopolitical development will stimulate speculative behavior
2. High-Frequency Trading Amplification Effect
   : Short-term trading inevitably exacerbates abnormal price fluctuations
3. Self-Fulfilling Expectation
   : Market concerns about supply disruptions themselves will drive up spot prices

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As the ultimate safe-haven asset, the price of gold is deeply affected by geopolitical risks. According to the analysis by Professor Sheng Songcheng of CEIBS, the price of gold is driven by two core factors[4]:

Historical data shows that the U.S. dollar index and gold prices exhibit a

. From January to September 2025, the U.S. dollar index fell from 108.6 to 97.6, a decline of over 10%, while the price of gold rose 23.9% during the same period[4].

Geopolitical conflicts trigger the dual effects of inflation expectations and safe-haven demand. During the 2025 Greenland Crisis, spot gold once hit an all-time high of $4,642.72 per ounce[5]. When the situation shifted from “direct confrontation threat” to “military exercises and diplomatic negotiations”, some long positions chose to take profits, putting downward pressure on gold prices and causing a pullback.

In 2024, the U.S. total debt-to-GDP ratio soared to

, requiring annual interest payments of up to $1.1 trillion[4]. This staggering debt scale has made gold’s credit advantages increasingly prominent. Compared to $35 per ounce during the Bretton Woods system era, the current gold price has increased by more than 100 times.

As the world’s primary reserve currency (accounting for 57.74% of global foreign exchange reserves), the U.S. dollar exhibits complex two-way performance during geopolitical conflicts[4]:

Scenario	U.S. Dollar Performance	Mechanism Explanation
Rising Safe-Haven Demand	Strengthens in the Short Term	Capital flows into U.S. dollar assets seeking safety
Rising Inflation Expectations	Under Pressure in the Medium Term	Expectations of loose monetary policy rise
Worsening Debt Concerns	Weakens in the Long Term	U.S. dollar credit is questioned

Since January 2025, the U.S. dollar index has continued to weaken, mainly due to the ongoing ferment of U.S. debt issues and expectations of a decline in the U.S. dollar’s reserve share[4].

As the world’s largest safe-haven asset market, U.S. Treasury bond prices are highly sensitive to geopolitical risks:

• Rising Safe-Haven Sentiment
  → Capital flows into Treasury bonds → Yields decline (prices rise)
• Easing Risk Sentiment
  → Capital flows out of Treasury bonds → Yields rise (prices fall)

During the 2025 Greenland Crisis, the 10-year U.S. Treasury yield fluctuated within the range of 4.130%-4.156%[5]. Market expectations of a de-escalation of the situation led to a slight pullback in the safe-haven premium, with yields rebounding from their lows.

: 30-year Treasury bond ETFs are more sensitive to interest rate changes, rising 23.21% in 2024, while recording a cumulative pullback of 5.98% in 2025[6].

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The transmission of geopolitical risks exhibits the characteristics of

:

Temporal Dimension	Impact Characteristics	Market Performance
Instantaneous Response (Minutes-Hours)	Panic Buying/Selling	Sharp price fluctuations, surging trading volume
Short-Term (1-4 Weeks)	Risk Premium Pricing	Prices deviate from fundamentals, speculative behavior increases
Medium-Term (1-6 Months)	Reshaping of Supply-Demand Relationships	Trade flows adjust, new balance forms
Long-Term (1+ Years)	Structural Adaptation	Supply diversification, accelerated energy transition

The impact of geopolitical conflicts exhibits

:

• Direct Impact Zone
  : Areas surrounding the conflict, with the highest risk of energy infrastructure damage
• Transmission Amplification Zone
  : Countries and regions with high energy import dependence, where price transmission effects are obvious
• Indirect Impact Zone
  : Bears volatility spillovers through financial market linkages

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A more profound change in 2025 has occurred beneath the price curve — the

[2]:

1. Higher Access Barriers
   : In key oilfield development projects, enterprises’ entry and exit are no longer solely determined by resource endowments, but are deeply influenced by their home country’s political stance
2. Increased Compliance Costs
   : Sanction trigger mechanisms, political risk exit clauses, and compliance subsidiary agreements occupy an increasingly important position in contract texts
3. Strengthened Requirements for “Political Correctness” in Supply Chains
   : Relatively closed-loop energy cooperation systems have formed between different political and economic blocs

This pattern of “stability within systems, fragmentation between systems” poses new challenges to all types of participants[2].

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┌─────────────────────────────────────────────────────────────────┐
│                Geopolitical Conflict Transmission Mechanisms    │
├─────────────────────────────────────────────────────────────────┤
│  Supply-Side Shock ──────→ Supply-Demand Imbalance ──────→ Price Increase │
│       │                    │                                  │
│       ├──→ Transportation Disruption ──────→ Rising Freight/Insurance Costs │
│       │                    │                                  │
│       └──→ Sanction Measures ──────→ Trade Flow Restructuring  │
│                                                                  │
│  Demand-Side Impact ──────→ Safe-Haven Demand ──────→ Asset Allocation Adjustment │
│       │                    │                                  │
│       ├──→ Gold ─────────→ Price Surge                        │
│       ├──→ U.S. Dollar ─────────→ Short-Term Strength, Long-Term Pressure │
│       └──→ Treasury Bonds ─────────→ Yield Decline            │
│                                                                  │
│  Market Psychology ──────→ Self-Fulfilling Expectation ──────→ Volatility Amplification │
└─────────────────────────────────────────────────────────────────┘

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The mechanisms by which geopolitical conflicts impact the global energy market and safe-haven assets have formed a multi-dimensional, complex transmission network:

1. Energy Market
   : Shifts from the direct “conflict-surge” model to a new form of “rule politicization” and “system fragmentation”. Prices are becoming more stable and rational, but competition at the order level is intensifying.
2. Safe-Haven Assets
   : Gold’s safe-haven attributes continue to be strengthened by the dual drivers of debt credit concerns and geopolitical risks; the U.S. dollar faces a tug-of-war between short-term safe-haven demand and long-term credit concerns; Treasury bond yields are highly sensitive to changes in risk sentiment.
3. Investment Implications
   : In an era where “black swans” and “gray rhinos” intersect, investors need to incorporate geopolitical analysis into their core decision-making frameworks, focusing on long-term allocation opportunities brought by structural changes rather than only short-term price fluctuations.

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[1] UN News - “Black Gold and Warfare: Decoding Oil Price Volatility Amid Middle East Geopolitical Games” (https://news.un.org/zh/story/2025/07/1140290)

[2] Tencent News - “Global Crude Oil Market: From Price Inertia to Rule Re-Politicization” (https://news.qq.com/rain/a/20260106A065M900)

[3] Huayuan Securities - “Natural Gas Price Fluctuations and Supply-Demand Reshaping: New Development Opportunities for the Natural Gas Industry” (https://pdf.dfcfw.com/pdf/H3_AP202507061703819253_1.pdf)

[4] CEIBS (China Europe International Business School) - “Sheng Songcheng: Reflections on Gold and Its Future Price Trends” (https://cn.ceibs.edu/new-papers-columns/27744)

[5] CNfol.com - “Greenland Conflict Threat Remains, But Gold and U.S. Dollar Simultaneously ‘Stall’” (http://gold.cnfol.com/jinshizhibo/20260115/31946168.shtml)

[6] Wenxuecity - “Two Most Profitable Directions in 2026” (https://www.wenxuecity.com/news/2026/01/06/126477888.html)