Gold and oil markets heading into 2027 will be shaped by a mix of geopolitical developments, interest-rate expectations and how investors position for risk, according to IG Senior Technical Analyst Angeline Ong in a written interview provided by IG.
Oil: the risk is not only a deal, but whether it holds
Ong said the biggest headwind for oil would be a “genuine US-Iran deal that materially eases the war premium.” However, she added that the greater risk, based on what she has seen so far, is “a deal that is announced but never honoured,” which she said could keep supply risks in place and support upward pressure on oil prices through 2027.
Gold: re-pricing could follow forced selling and liquidation
On gold, Ong called it “the more interesting trade of the two (vs oil).” She attributed a sell-off after gold’s early-2026 peak largely to forced liquidation and the unwinding of “excess froth” built up during the earlier rally. In her view, gold can re-rate quickly once that pressure eases, though she said it is something she would keep as “a small position size,” with adjustments depending on shifts in the “mood music” around oil and interest rates.
Rates and real yields remain central for gold
Ong said interest rates and real yields remain central to gold’s investment case. She noted that when central banks tighten and yields rise, gold becomes less attractive relative to income-generating assets. While she pointed to geopolitical uncertainty and central-bank buying as supports, she warned that sustained monetary tightening could limit gold’s ability to build further upward momentum.
She described a more favourable environment as one where a diplomatic breakthrough in the Gulf brings oil prices lower, easing inflationary pressures and reducing expectations of further interest-rate increases. In that scenario, she said falling real yields and an end to forced selling across financial markets could strengthen the foundation for gold to recover.
Oil scenarios for 2027: supply disruption premium versus restored flows
Ong’s upside scenario for oil in 2027 is a prolonged US-Iran diplomatic stalemate, or an agreement that fails to restore reliable shipping through the Strait of Hormuz. She said either outcome could keep supply-disruption fears in the market and sustain a significant geopolitical premium, adding that even spare production capacity may not be enough if shipping routes remain constrained and OPEC+ struggles to bring additional barrels to market.
Her downside scenario is a durable peace agreement that restores Gulf oil flows and allows OPEC+ to unwind production cuts gradually. But she cautioned that global demand growth is already under pressure, and that additional supply entering the market could push prices materially lower. The eventual outcome would depend, she said, on how restored supply balances with subdued demand.
What could it mean for Gulf economies and equities?
Ong said a sustained decline in oil prices after a peace agreement could benefit Gulf equity markets, particularly sectors affected by geopolitical uncertainty. She cited potential upside for banks, property developers and consumer-facing businesses, as well as tourism, logistics and trade-linked companies tied to regional stability.
At the same time, she said energy producers face a more complicated picture. She pointed to Aramco’s decline following a ceasefire announcement as an example of how quickly investors may focus on the prospect of lower oil prices rather than the recovery of production volumes. For regional investors, she said any benefits from peace may be unevenly distributed across sectors.
Dirham peg: insulation from FX, but still exposure to the dollar
For UAE investors, Ong said the dirham’s peg to the US dollar (about 3.6725) largely insulates them from direct currency fluctuations between the two when investing in dollar-priced commodities such as gold and oil. Movements in international prices would therefore be reflected closely in their dirham value.
However, she added that the dollar’s performance against other major currencies still matters. A stronger dollar could weigh on global commodity demand and prices, while a weaker dollar could provide support, meaning UAE investors remain exposed to US monetary-policy and broader currency developments.
Portfolio role and common risks
Ong described gold and energy as serving different roles in a diversified portfolio. She said gold can hedge against geopolitical uncertainty and financial instability, while energy can provide income and some protection against inflation. But she said neither should be treated as a guaranteed defensive investment, pointing again to gold’s earlier sell-off as evidence that even safe-haven assets can come under pressure when investors need to raise cash.
She also stressed that the investment vehicle matters. Physical gold can involve storage costs and purchase premiums, while exchange-traded products introduce fees and potentially additional risks depending on their structure. Energy shares reflect company and equity-market exposure, and commodity-linked products can be influenced by futures pricing and volatility.
What to monitor before changing her outlook
Looking ahead, Ong said the key development to watch is whether US-Iran diplomacy produces a credible and lasting agreement that sustains declines in oil prices. She argued that would ease inflationary pressures and could give central banks more room to loosen monetary policy.
She added that beyond diplomatic headlines, investors should track actual oil flows through the Strait of Hormuz, OPEC+ production decisions, inflation data and movements in US Treasury yields. Together, she said, these indicators would help clarify whether geopolitical risks are truly receding and whether any improvement in economic conditions is strong enough to support a broader recovery in financial markets.
