GFN – DUBAI: Gold is trading at significant discounts in Dubai as the expanding Middle East conflict disrupts air transport routes, stranding bullion shipments in one of the world’s key trading hubs and forcing traders to lower prices to move inventory.
According to a Bloomberg report by Yihui Xie and Preeti Soni, traders in Dubai are offering bullion at discounts of up to $30 per ounce relative to the London benchmark as grounded flights and elevated insurance costs complicate the movement of gold out of the United Arab Emirates. Buyers have largely stepped back from placing new orders as shipping expenses surge and delivery timelines become uncertain.

 

Market participants said multiple shipments remained stranded late this week, though some cargo began leaving Dubai on outbound flights from midweek. Dubai functions as a critical logistics and refining center for bullion flows into Asia, particularly India, while also serving as a redistribution hub for gold sourced from Switzerland, the United Kingdom, and several African producers.

Regional airspace restrictions linked to Iranian missile activity have forced partial closures across the United Arab Emirates as the United States and Israel continue military operations against Iran, now entering a seventh day. The disruption has sharply constrained traditional bullion transport routes, which typically rely on passenger aircraft cargo holds for secure shipment.

Traders and logistics providers have explored land transport options to alternative airports in Saudi Arabia or Oman, but market participants indicate such routes involve heightened operational risks and complex border procedures that make them unattractive for high-value cargo.

Renisha Chainani, head of research at Augmont Enterprises Ltd., said the disruption is beginning to affect Indian buyers dependent on Dubai shipments.

“Several cargo shipments have been delayed or stranded, leading to short-term tightness in the availability of physical bullion in India.”

For now, however, downstream demand remains relatively subdued. India entered the year with elevated inventories following heavy imports in January, giving dealers some buffer against immediate supply shortages.

Chirag Sheth, principal consultant for South Asia at Metals Focus, said current stock levels are sufficient in the near term but could become problematic if transport disruptions persist.

“As of now, there is ample stock, but if this drags on for a few months, then there will be a problem.”

The logistical bottlenecks are also beginning to affect the upstream supply chain. India’s largest precious-metals refinery, MMTC-PAMP, receives roughly 10% of its doré feedstock from a Middle Eastern mine, according to Chief Executive Officer Samit Guha, who said deliveries have been disrupted by the conflict. Logistics costs for replacement supplies from other regions have risen sharply.

 

“For new contracts supplied from elsewhere, logistics costs have soared by 60% to 70% since the war began.”

Despite the operational challenges, the broader gold market remains historically strong. Spot prices have climbed nearly 20% this year, maintaining levels above $5,000 per ounce, although recent sessions have shown increased volatility as the U.S. dollar strengthened.

The emerging discount in Dubai highlights how geopolitical disruptions can fracture the global bullion logistics network. When transport channels seize up, regional hubs can temporarily decouple from global benchmark pricing as traders prioritize liquidity and inventory management over spot parity.