With tensions rising in the Middle East, investors should consider adding gold and oil as a hedge. “Any widespread regional war would likely affect oil supplies and send prices soaring, while gold should act as a more conservative asset,” UBS analysts led by Tilman Kolb told clients in a note on Wednesday. Israel and Iran appear to be on the brink of direct conflict after the assassination of Hamas political leader Ismail Haniyeh in Tehran this week. Iran has vowed to retaliate, with sources in the New York Times reporting that Supreme Leader Ayatollah Ali Khamenei has ordered a direct attack on Israel. A few days ago, a rocket fired from Lebanon killed 12 children in the Israeli-occupied Golan Heights. Israel blamed the Iran-backed Hezbollah for the attack, which took place in Beirut, killing one of the militia’s senior commanders, Fouad Shukr. “While no country appears to have a clear interest in escalating the war at this time, the risk that retaliation or miscalculation could trigger an escalating military conflict is high,” UBS analysts wrote. Gold prices have risen since the Beirut attack, “highlighting its risk-hedging properties,” the analysts said. Strong demand from banks, which is likely to increase if the Federal Reserve cuts interest rates, should also boost gold prices, they said.
UBS says investors should buy gold, oil for defense amid rising Middle East tensions
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