Global markets tumble as oil tops $110 amid Middle East conflict
Global markets tumble as oil tops $110 amid Middle East conflict
M.U.H
09/03/202635
Global financial markets came under heavy pressure on Monday after oil prices surged to their highest levels in more than two years, triggering a broad sell-off in equities and raising concerns about a renewed inflation shock to the world economy.
Stock markets across Asia fell sharply as crude prices spiked amid growing fears of supply disruptions linked to the escalating conflict in the Middle East, where hostilities involving the United States, Israel and Iran have entered a second week.
Both major oil benchmarks recorded dramatic gains in early trading. Brent crude and the US benchmark West Texas Intermediate rose above $114 a barrel, marking increases of more than 20 per cent from Friday’s close. At one stage, WTI jumped almost 30 per cent to nearly $119 a barrel, while Brent approached $118.
The sharp rise in crude prices followed mounting attacks on energy infrastructure and rising tensions across the region, which have threatened both oil production and shipping routes.
Tanker traffic through the Strait of Hormuz — a key maritime corridor through which roughly one-fifth of the world’s oil and gas normally passes — has largely halted since the conflict intensified on 28 February.
Several major oil producers, including Iraq, Kuwait and the United Arab Emirates, have begun cutting output as export routes remain disrupted and storage facilities fill up. At the same time, oil and gas installations in Iran, Israel and elsewhere have reportedly been targeted in strikes since the fighting began.
Market analysts warned that the current surge reflects more than just geopolitical anxiety, pointing instead to real disruptions to the physical supply of energy.
Stephen Innes of SPI Asset Management said the market was confronting a tangible supply shock rather than a short-term reaction to headlines. He warned that oil prices above $100 per barrel effectively act as a tax on the global economy, increasing costs for businesses and consumers alike.
The spike in oil prices has heightened concerns that inflation could accelerate again worldwide, potentially complicating efforts by central banks to lower interest rates and support slowing economic growth.
Equity markets across Asia reacted sharply to the developments. Japan’s Nikkei 225 fell more than 7 per cent in early trading, while South Korea’s Kospi dropped by over 8 per cent. Taiwan’s benchmark index declined more than 5 per cent, and markets in Australia and New Zealand each slid by more than 3 per cent.
In Hong Kong, the Hang Seng index fell about 3 per cent, while China’s Shanghai Composite slipped roughly 1.5 per cent. The broader regional benchmark index dropped as much as 5.4 per cent, marking its steepest decline since April.
The market turbulence was also expected to spread to Western economies. Futures linked to the S&P 500, Dow Jones Industrial Average and Nasdaq all fell by more than 2 per cent, while European stock futures were down nearly 3 per cent.
Investors moved towards safer assets, pushing the US dollar higher against major currencies. The dollar strengthened to around 158.6 yen, while the euro weakened to approximately $1.15.
The market turmoil comes as the conflict in the Middle East increasingly threatens energy infrastructure and shipments across the Persian Gulf. Energy research firm Rystad Energy estimates that about 15 million barrels of crude oil typically pass through the Strait of Hormuz each day.
Escalating military activity over the weekend has further unsettled markets. Bahrain accused Iran of striking a desalination facility vital to its drinking water supply, while Israeli forces reportedly targeted oil depots in Tehran.
US President Donald Trump acknowledged the surge in oil prices but described it as a temporary consequence of efforts to counter Iran’s nuclear programme.
In a social media post, he said higher oil prices in the short term were “a very small price to pay” for global security and stability once the perceived nuclear threat from Iran is eliminated.
However, market strategists warned that financial volatility could persist if the conflict continues.
Michael O’Rourke, chief market strategist at JonesTrading, said investor sentiment was likely to remain cautious in the near term, adding that markets could stay in a risk-averse mode until there are clear signs of de-escalation.
Emerging markets are also bracing for the fallout from rising oil prices. In India, GIFT Nifty futures indicated that the Nifty 50 index could open nearly 3 per cent lower, reflecting investor concerns about higher energy costs.
As the world’s third-largest importer of crude oil, India is particularly vulnerable to sustained increases in oil prices. Analysts warn that a prolonged period of crude trading above $100 per barrel could widen the country’s import bill, weaken the rupee and push up inflation.
Economists caution that if energy prices remain elevated for an extended period, the consequences could extend far beyond financial markets, potentially slowing global economic growth and increasing the risk of recession.
