Global Markets Tumble on Iran Tensions
Global markets reacted sharply to the escalating US-Iran conflict. In Asia, the Nikkei crashed 900 points and Hong's Hang Seng index fell over 2%. Unusually, bonds—typically a safe haven—did not rally as expected, adding to market uncertainty.
The surge in oil prices was immediate and significant, with Brent crude jumping by as much as 13% to an intra-day high of $82 a barrel, its highest level in 14 months. Analysts are now predicting that a prolonged conflict, especially one that halts shipping through the Strait of Hormuz, could feasibly push prices above $100 per barrel. This market turbulence is directly linked to the strategic importance of the Strait of Hormuz, a critical channel for global energy supplies. Approximately 20% of the world's daily oil supply passes through this waterway, and a *de facto* closure has been created as major shipping operators and insurers have halted transit. European markets felt the impact acutely, with the pan-European Stoxx 600 index falling 1.4% to a two-week low. U.S. stock futures also pointed to a sharp decline, with Dow futures down 1.14%, S&P 500 futures dropping 1.1%, and the tech-heavy Nasdaq futures falling 1.5%. The sell-off has hit specific sectors hard, particularly airlines, with British Airways' parent company IAG's stock falling 5%. Conversely, the escalating conflict has boosted the shares of defense companies; BAE Systems saw its stock jump by 4.5% as investors moved into the sector. Large-cap defense firms like Lockheed Martin and Northrop Grumman also saw gains in extended-hours trading. Market volatility has spiked, with Wall Street's "fear index," the VIX, surging 16% to its highest level since November 2025. This reflects a classic "risk-off" sentiment among investors, who are reducing their exposure to equities amid the heightened uncertainty. The current crisis follows a U.S.-Israeli strike on Iran that killed Supreme Leader Ali Khamenei, prompting retaliatory strikes from Tehran on Gulf neighbors. President Donald Trump has stated that "major combat operations" are underway and will continue until objectives are met, signaling that the conflict may not be resolved quickly. While gold has acted as a traditional safe haven, with prices rising, the reaction in the bond market has been more complex. Some analysts suggest that the potential for a sustained oil price shock to fuel inflation is complicating the typical flight to the safety of government bonds.
