The Middle East conflict has caused flight cancellations in Dubai, and 20% of global gold logistics may be interrupted, with silver also affected!

The escalation of the Middle East conflict is impacting the core nodes of the global precious metals supply chain.

Dubai, as a key hub for global gold circulation, accounted for about 20% of the world's gold flow last year. With the military strikes by the United States and Israel against Iran that began last Saturday, commercial flights in the Gulf region have been largely suspended, leading to severe disruptions in the cross-border transportation of gold and silver.

According to a report by the Financial Times on Wednesday, precious metals traders warned that if this situation continues, regional prices in the Asian market may come under further pressure, and the volatility of gold and silver prices will significantly increase.

The market has already shown initial reactions. John Reade, senior market strategist at the World Gold Council, stated that the suspension of flights in the Middle East has raised market concerns about the availability of gold, with domestic gold prices in India quickly rebounding from a discount of about $50 per troy ounce compared to London prices last Friday to parity with London prices on Monday. This week, gold prices have overall dropped by about 3%, to around $5,100 per troy ounce, but are still nearly 20% higher than at the beginning of the year.

Dubai: The Core Transit Hub for Global Gold Circulation

Dubai plays a crucial role in the global precious metals logistics system. According to customs data, Dubai is the second-largest gold exporter in the world in 2024, with its gold flow covering two main sources: one is gold bars mined in Africa and refined in the UAE, and the other is precious metal goods transiting from Europe to Asia via Dubai. India is the largest destination for gold exports from Dubai.

Rhona O'Connell, head of market analysis at StoneX, pointed out that India will be the biggest victim of the logistics disruption in Dubai, as Dubai is the core transshipment port for precious metals flowing into India. "In the short term, market participants may still find ways to cope, but if the situation persists for a long time, everything is unpredictable," she said.

Gold is typically transported by cargo on passenger planes, with a single shipment capable of carrying up to 5 tons, equivalent to about $830 million at current prices.

Flight Suspensions Cause "Blocked Exports" Backlog

Since the military operations began last Saturday, the vast majority of commercial flights in the Gulf region have been suspended. Although a small number of passenger planes took off from Dubai on Tuesday, sources revealed that these flights did not carry gold cargo—perishable goods were prioritized for transport.

"Currently, nothing is flowing in the air," said a bullion trader, expressing hope that this disruption will not last too long.

London is also experiencing a chain reaction. Some logistics carriers stated that they are busy dealing with gold goods that have arrived at Heathrow Airport but cannot continue transportation due to flight suspensions. This batch of goods has completed customs declaration procedures, forming what is known as "blocked exports"—which must be formally withdrawn from declaration before transportation routes can be re-planned, further increasing operational costs and time losses.

Silver Impact May Be Greater Than Gold

According to insiders, for goods departing from London, silver is currently experiencing an impact that exceeds that of gold. This year, silver prices have already undergone severe fluctuations, partly due to massive purchases by retail investors, leading to China's silver inventory dropping to a ten-year low. This logistics disruption undoubtedly exacerbates the already tight supply situation for silver The logistics disruption caused by the recent Middle East conflict is not the first major test faced by the precious metals supply chain this year. Last year, a significant influx of precious metals into the United States for stockpiling was influenced by potential tariff threats from the U.S., which also caused significant disturbances in the global gold circulation pattern.

Analysts and traders generally believe that the ultimate impact of this shock depends on the duration of the situation. If flight disruptions are resolved in the short term, the market still has the capacity to absorb it; however, if the conflict drags on, the supply gap and price premiums in the Asian market will be unavoidable, and the volatility of gold and silver prices will further amplify