Middle East conflict halts Dubai flights, 20% of global gold logistics may be disrupted, silver also affected!

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

As a crucial hub for global gold circulation, Dubai accounted for about 20% of the world's gold flow last year. Following U.S. and Israeli military strikes on Iran that began last Saturday, large numbers of commercial flights in the Gulf region have been suspended, causing severe disruptions to the cross-border transport of gold and silver.

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

The market has already started to react. John Reade, Senior Market Strategist at the World Gold Council, stated that the suspension of flights in the Middle East has sparked concerns about the availability of gold supplies. Last Friday, India's domestic gold price was at a discount of about $50 per troy ounce compared to the London price, but quickly rebounded to parity with the London price by Monday. Gold prices fell about 3% this week, to around $5,100 per troy ounce, but remain nearly 20% higher than at the start of the year.

Dubai: The Global Core Trans-shipment Hub for Gold

Dubai plays a pivotal role in the global precious metals logistics system. According to customs data, Dubai is the world's second largest gold exporter in 2024, and its gold flow encompasses two main sources: first, gold bars mined in Africa and refined in the UAE; second, precious metals shipped from Europe to Asia and transshipped through Dubai. India is the largest destination for Dubai's gold exports.

Rhona O'Connell, head of market analysis at StoneX, pointed out that India will be the main victim of the Dubai logistics disruption, as Dubai is the core transshipment port for precious metals entering India. "In the short term, market participants may be able to find alternate routes, but if this lasts, the outcome is anybody’s guess," she said.

Gold is usually transported in air cargo on passenger planes, with a single shipment reaching up to 5 tons—equivalent to about $830 million at current prices.

Flight Suspensions Cause "Blocked Export" Backlogs

Since the start of military action last Saturday, the vast majority of commercial flights in the Gulf region have been suspended. Although a small number of passenger flights departed from Dubai on Tuesday, according to insiders, these flights did not carry gold cargo—perishable goods took priority for shipment.

"Nothing is moving in the air right now," said one bullion trader, expressing hope that these disruptions will not last too long.

There are also knock-on effects in London. Some logistics carriers reported they are busy handling gold cargo that has already arrived at Heathrow Airport but cannot be shipped further due to flight suspensions. These shipments have completed customs procedures and have become so-called "blocked exports"—they must formally withdraw customs declarations before a new routing can be arranged, further increasing operational costs and time delays.

The Impact on Silver May Be Greater Than Gold

According to market insiders, in terms of cargo originating from London, the impact on silver currently exceeds that on gold. Since the start of the year, silver prices have already experienced sharp volatility, partly due to a surge in retail investor buying, which has caused silver inventories in China to fall to the lowest level in a decade. The current logistics disruptions will only make the already tight silver supply situation worse.

This logistics disruption resulting from the Middle East conflict is not the first major challenge faced this year by the precious metals supply chain. Last year, the threat of possible U.S. tariffs led to a large inflow of precious metals stockpiling in the U.S., also causing significant disruption to the global gold circulation patterns.

Analysts and traders generally believe the ultimate impact of this shock will depend on how long the situation persists. If flight suspensions are resolved in the short term, the market can absorb the shock; but if the conflict drags on, supply shortages and price premiums in the Asian market will be hard to avoid, and price volatility for gold and silver will further intensify.

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