Buy gold and oil for protection as Middle East tensions escalate, UBS says

As tensions escalate in the Middle East , investors should consider adding gold and oil as a hedge. “A wider regional war could affect oil supplies, which would likely lead to quick price spikes. Gold, meanwhile, should serve its role as a more conservative asset,” UBS analysts led by Tilmann Kolb told clients in a Wednesday note. Israel and Iran appear on the verge of a direct conflict after the assassination of Hamas political leader Ismail Haniyeh in Tehran this week. Iran has vowed to retaliate, with sources telling the New York Times that the Supreme Leader Ayatollah Ali Khamenei has ordered a direct strike on Israel. Days prior, a rocket launched from Lebanon killed 12 children in the Israeli-occupied Golan Heights. Israel blamed Iran-backed Hezbollah and launched a strike in Beirut that killed one of the militia’s senior commanders, Fuad Shukr. “We do not believe anyone has a clear interest at the moment to broaden the war, but the risk of any retaliation or miscalculations triggering a wider military conflict is high,” the UBS analysts wrote. Gold has risen since the Beirut strike, “underlining its risk hedge characteristics,” the analysts said. High demand from banks and a likely uptick in demand when the Federal Reserve lowers rates should also push gold prices higher, they said.