Oil prices retreated on Monday as fears of a wider Middle East conflict eased even as Israel and Iran pounded each other with missiles for a fourth day and threatened further attacks.

Gold prices rose back towards a record high thanks to a rush into safe havens but equities were mixed amid hopes that the conflict does not spread.

Investors were also gearing up for key central bank meetings this week, with a particular eye on the US Federal Reserve and Bank of Japan (BoJ), as well as talks with Washington aimed at avoiding Donald Trump’s sky-high tariffs.

Israel’s surprise strike against Iranian military and nuclear sites on Friday — killing top commanders and scientists — sent crude prices soaring as much as 13 percent at one point on fears about supplies from the region. However, concerns over the conflict spreading appeared to have eased, with prices retreating in Asian trade.

Analysts had warned that the spike could send inflation surging globally again, dealing a blow to long-running efforts by governments and central banks to get it under control and fanning concerns about the impact on already fragile economies.

“The knock-on impact of higher energy prices is that they will slow growth and cause headline inflation to rise,” said Tony Sycamore, a market analyst at IG.

“While central banks would prefer to overlook a temporary spike in energy prices, if they remain elevated for a long period, it may feed through into higher core inflation as businesses pass on higher transport and production costs.

“This would hamper central banks’ ability to cut interest rates to cushion the anticipated growth slowdown from President Trump’s tariffs, which adds another variable for the Fed to consider when it meets to discuss interest rates this week.”

Both main oil contracts were down, giving up earlier gains in Asian trade.

Fed, BoJ in focus

“Oil markets remain amply supplied with OPEC set on increasing production and demand soft. US production growth has been slowing, but could rebound in the face of sustained higher prices,” Morningstar director of equity research Allen Good said.

“Meanwhile, a larger war is unlikely. The Trump administration has already stated it remains committed to talks with Iran.

“Ultimately, fundamentals will dictate price, and they do not suggest much higher prices are necessary. Although the global risk premium could rise, keeping prices moderately higher than where they’ve been much of the year.”