International gold prices dropped over 2% on the afternoon of July 13 US Eastern Time, with August delivery gold futures falling $111.80 (2.72%) to $4,001.90 per troy ounce on the COMEX exchange as of 2:23 PM. The decline was triggered by the US military's announcement of a full reinstatement of Iran maritime blockade and hawkish statements from Federal Reserve officials signaling potential interest rate increases. The developments occurred amid escalating US-Iran military tensions, with US Treasury yields rising sharply as oil prices surged 6.30% on renewed Middle East conflict concerns.
Trump Announces Full Reinstatement of Iran Maritime Blockade
President Donald Trump stated on July 13, "We are reactivating the Iran blockade measures," adding that "this measure is named as such because it only blocks Iranian ships or their customers from entering or leaving." Trump declared that "the United States will become the 'Guardian of the Strait of Hormuz' from this point forward" and announced the US will collect 20% of all shipping cargo transiting the Strait of Hormuz as a security management fee.
JMIC Confirms Blockade Effective July 14 Covering All Iranian Ports
The Joint Maritime Information Center (JMIC), led by the US military with a 47-nation coalition navy, subsequently announced that "the US military's Iran maritime blockade measures will take effect from July 14 at 8 PM Greenwich Mean Time (GMT)." The blockade scope includes Iran's ports and oil terminals and encompasses the entire Iranian coastline.
WTI Crude Oil Rises 6.30% to $77.71 per Barrel
West Texas Intermediate (WTI) crude oil for August delivery rose 6.30% to $77.71 per barrel. Fawad Razaqzada, market analyst at Forex.com, stated, "Oil prices are rising due to Middle East conflict," adding, "There is also the possibility of the Fed tightening monetary policy, which is negative for non-interest-bearing assets."
Fed Governor Waller Signals Potential Monetary Policy Tightening
Federal Reserve Governor Christopher Waller stated, "If core inflation comes out high again this week, the Federal Open Market Committee (FOMC) will need to consider tightening monetary policy in the near future." The statement reflects growing concerns about inflation pressures from rising oil prices driven by Middle East tensions.
Rate Hike Probability Increases to 43.3% in Futures Market
Following Waller's remarks, the probability of a 25 basis point rate increase at the July FOMC meeting rose sharply. According to the CME FedWatch Tool, the federal funds rate futures market reflected a 43.3% probability of a 25bp rate increase by the end of the month, up from 34.2% the previous day.
FAQ
What caused gold prices to drop on July 13?
Gold prices dropped 2.72% to $4,001.90 per troy ounce on July 13 due to the US military's announcement of reinstating a full Iran maritime blockade and hawkish statements from Federal Reserve officials about potential interest rate increases. Rising US Treasury yields and oil prices also contributed to the decline.
When does the US Iran blockade take effect?
The US military's Iran maritime blockade takes effect on July 14 at 8 PM Greenwich Mean Time (GMT), according to the Joint Maritime Information Center (JMIC). The blockade covers all Iranian ports, oil terminals, and the entire Iranian coastline.
How much did the probability of a Fed rate hike increase?
The probability of a 25 basis point rate increase at the July FOMC meeting rose to 43.3% in the federal funds rate futures market, up from 34.2% the previous day, following Fed Governor Christopher Waller's statement about potential monetary policy tightening if core inflation remains high.
