Markets Rattled by Iran Conflict Fallout
Global markets were sent reeling by the spike in energy prices following the Iran conflict, stoking fresh inflation fears. The shockwave sent the 10-year Treasury yield past 4% and hit the housing market, where mortgage rates jumped sharply higher. Meanwhile, investors sought safe havens, pushing gold prices up as stocks initially fell.
The market turmoil follows joint U.S. and Israeli military strikes on Iran that began late February 28, 2026. The operation targeted Iranian leadership, including Supreme Leader Ayatollah Ali Khamenei, along with nuclear facilities and military infrastructure, prompting retaliatory strikes from Tehran. In response, Iran declared the Strait of Hormuz effectively closed, halting traffic through the critical chokepoint for about 20% of the world's oil shipments. The move has trapped nearly 170 container ships and caused Iranian-flagged vessel activity to plummet by over 95%. Brent crude futures quickly rose 7-9% to trade between $78 and $80 per barrel, while West Texas Intermediate (WTI) crude saw a similar 6-8% jump. Analysts warn that a prolonged disruption to shipping could push oil prices above $100 per barrel. The shock extends beyond energy, crippling global supply chains already under stress. Air freight costs have spiked 400% in 48 hours, disrupting the just-in-time delivery of microchips and EV batteries and jeopardizing pharmaceutical exports from Asia. This inflationary jolt complicates the Federal Reserve's calculus. Prior to the conflict, forecasts suggested one or two interest rate cuts were possible in 2026, but the energy price shock now puts the Fed in a difficult position ahead of its March 17-18 meeting. Initial stock market losses were steep, with the Dow Jones Industrial Average falling as much as 600 points before recovering to close down just over 70 points. This rebound suggests many investors have shifted to a "wait-and-see" mode rather than engaging in a full-blown panic. The surge in crude is expected to lift U.S. gasoline prices by an average of 10-30 cents, with diesel prices seeing an even sharper rise. This will be particularly felt by drivers in California, where fuel costs are already among the nation's highest.
