12-Day War: Oil and Gold Market Impact
summary of the Article: Raw Materials as Refuge Values in times of Geopolitical Tension (2025)
This article discusses the increasing role of raw materials, notably oil adn gold, as “refuge values” in the face of growing geopolitical tensions and market volatility in 2025. Here’s a breakdown of the key points:
Increased ETF Trading: There’s been a notable surge in trading of Exchange Traded Funds (ETFs) focused on listed indices in France – 5.2 million transactions in 2024 compared to 2.8 million in 2023.
geopolitical Concerns & Oil Prices: Tensions surrounding the Strait of Ormuz (a critical oil transit route) led to a sharp increase in oil prices in June 2025: Brent Crude rose 8.28% to $75.10/barrel, and WTI rose 8.8% to almost $74. The oligopolistic nature of the oil market exacerbates sensitivity to geopolitical events.
Raw materials as a Hedge: Raw materials are being used as potential hedges against inflation, portfolio diversification tools, and even as monetary substitutes during economic uncertainty.
Volatility Measures: The article explains the difference between historical and implicit volatility. It highlights the VIX index (frequently enough called the “fear gauge”) as a measure of market risk perception.
Gold as a Conventional Refuge: Academic research consistently shows gold functioning as a refuge value during financial crises (1987, 1997, 2008). It performs well when financial asset yields are negative.
Gold’s Correlation with Markets: Gold has a negative correlation with stocks, particularly during market downturns. Demand for gold decreases during bull markets. The VIX index is used to gauge global risk perceptions and, therefore, potential gold demand.
* Future Contracts & volatility: Increased activity in futures contracts for raw materials is amplifying market volatility.
In essence, the article argues that in 2025, amidst rising global instability, investors are increasingly turning to raw materials – especially oil and gold – as safe havens to protect their wealth. The VIX index is a key indicator to watch for understanding market sentiment and potential shifts in investment towards these refuge assets.