Iran War Roils Markets, Oil Spikes 14%
Global markets are reacting to the escalating war with Iran, with oil prices surging more than 14% on fears of supply disruption. US equities have been volatile, plunging on the news before partially recovering as investors rotate into safe havens like gold.
The conflict's immediate impact is centered on the Strait of Hormuz, a critical chokepoint for global energy. Roughly one-fifth of the world's seaborne oil trade passes through the strait, and tanker traffic has been effectively halted as Iran has declared the route closed. The international oil benchmark, Brent crude, saw its price climb 13% to $82 a barrel, its highest level since July 2024, before easing slightly. The U.S. benchmark, West Texas Intermediate, also surged, rising to $72.79 a barrel. The energy shock extends beyond crude oil. Natural gas prices have also jumped after Iranian strikes near Qatar's Ras Laffan Industrial City, the world's largest liquefied natural gas (LNG) plant, prompted a halt in production. Global stock markets have seen steep losses, with Japan's Nikkei, Germany's DAX, and Britain's FTSE 100 all declining. Airline stocks have been hit particularly hard by the combination of soaring fuel costs and widespread flight disruptions, with shares of American Airlines, United, Delta, and Qantas all falling. The escalation follows joint U.S. and Israeli strikes on Iran that killed the country's Supreme Leader, Ayatollah Ali Khamenei. In response, Iran has launched retaliatory missile and drone attacks on Israel, U.S. military bases, and neighboring Gulf states. In an effort to calm markets, eight OPEC+ member countries, including Saudi Arabia and Russia, announced a surprise production increase of 206,000 barrels per day starting in April. This move may be helping to limit a more dramatic, sustained price surge. Historically, geopolitical shocks in the Middle East often create immediate, sharp spikes in oil prices. During the 1990 Gulf War, oil prices surged nearly 97% before reversing as the supply situation stabilized. Analysts note these initial spikes are often driven more by fears of future disruption than by confirmed supply losses. The sudden rise in energy costs is stoking fears of a new wave of global inflation. A sustained conflict could complicate monetary policy for central banks, which had been anticipating potential interest rate cuts.
