Global Stocks Slump, Oil Soars as War Engulfs Middle East

Key Takeaways

• US equities headed for declines in premarket trading while oil prices spiked, as fighting entered its third day Monday.
• Shipping through the Strait of Hormuz, a chokepoint for global oil supplies, has slowed to a near standstill, endangering oil markets.
• A prolonged surge in oil prices would quickly impact inflation expectations, with analysts warning a global inflationary scare could dampen interest rate cuts

Oil prices spiked, equities slipped and investors piled into safe-haven assets Monday as markets assessed the escalating war in the Middle East following the killing over the weekend of Iran’s supreme leader Ayatollah Ali Khamenei.

Brent crude oil, the global benchmark, shot up 11% after markets reopened Sunday evening, and was last seen trading up 8% at $79. WTI contracts were up 8% at $72.

In the early morning hours, US stocks headed for similar declines as those seen in Asia and Europe.

Futures on the S&P 500 index were down 1.1% while those for the tech-heavy Nasdaq 100 declined 1.5%. In premarket trading, gains by oil majors including Exxon XOM, up 5%, and defense firms like Lockheed Martin LMT, up 7%, were offset by broad declines in travel and other cyclical industries.

Amid a flight to safe-haven assets, gold advanced more than 2% while the dollar index climbed above 98 points, hitting a five-week high.

Fighting in the Persian Gulf entered its third day Monday, with waves of missile and drone attacks intensifying across the region as Iran conducted retaliatory strikes to avenge the killing of the Ayatollah and other top officials in US-Israeli attacks launched Saturday, after talks to curb Tehran’s nuclear program had broken down.

Shipping through the Strait of Hormuz, a chokepoint for global oil supplies, slowed to a near standstill over the weekend, as insurers cautioned that they would cancel policies and raise premiums. As of Sunday, at least three tankers were damaged and one crew member was killed in retaliatory strikes.

Investors are now watching closely to see whether the US and its allies can avoid a prolonged shutdown of energy shipments through the key trade channel.

A Chokepoint for Global Oil Trade

The Strait of Hormuz is a critical maritime transit route, accounting for around 20% of global oil supplies. That includes around a third of the world’s total seaborne crude exports, destined primarily to Asia, according to market intelligence firm Kpler.

Monday’s oil price spike is consistent with that seen in June 2025, when tensions in the region flared up, with Israel and Iran exchanging air and missile attacks. However, further volatility could be expected over the coming days and weeks if the conflict continues, particularly if Iran shifts its focus from military targets to energy assets.

Analysts warn that could cause oil prices to approach $100 if the conflict were to endure over an extended period.

“Oil prices would probably level out at $85-95 [per barrel] as strategic reserves were released,” David Roche, president of Quantum Strategy, says.

OPEC+ announced Sunday that it would raise oil production in April by 206,000 barrels a day, as the Saudi Arabia-led energy coalition sought to stem anticipated disruption to crude markets.

However, additional barrels may do little to boost supplies if trade routes become unserviceable. “Spare barrels serve little purpose if there are no serviceable sea lanes,” says Helima Croft, an analyst at RBC Capital, in a note to clients.

LNG supplies, meanwhile, could become a “major challenge, with potential for shortages if a blockade or de facto closure of the Strait was sustained for more than a few weeks,” Dan Marks, research fellow in energy security at the Royal United Services Institute, says.

How Great Is the Risk to the Global Economy?

While last year’s 12-day conflict between Iran and Israel had a limited impact on commodity prices, an extended conflict in the Middle East could have severe implications for the global economy.

“While the US and Israel appear to some degree in control of the situation, oil prices may be high but contained. If markets sense that the US and Israel are losing control of the situation and a closure has persisted for more than a few days, it is possible there will be panic,” Marks says.

Quantum’s Roche says there are few historic precedents for the potential impact of the conflict: “This one could be long duration and of much greater economic impact.”

Investors will now be bracing for more volatility over the coming days and weeks, with markets potentially swinging toward risk-on relief in the event of regime change in Iran and a resumption in oil trade, to risk-off if the conflict persists and supply disruptions intensify.

“In a prolonged period of uncertainty, increases in oil prices could generate a global inflationary scare, which in turn may reduce the likelihood of interest rate cuts by the US Federal Reserve, currently expected for later this year,” Adam Hetts, Global Head of Multi-Asset and Portfolio Manager at Janus Henderson Investors, says.

Lukas Strobl and Sunniva Kolostyak contributed to this story.