Rising hostilities in the Middle East are increasing pressure on oil transportation and infrastructure, fueling global investor concerns over future market turbulence. On Monday, crude oil futures climbed above $100 per barrel, while spot crude prices exceeded $110. US stock index futures declined.
Gold prices fell to around $5,120 per ounce in early trading after posting their first weekly decline in over a month, pressured by a stronger US dollar and inflation risks. The US dollar index rose 0.4%.
WTI crude prices gained approximately 19% last week, reaching around $108 per barrel, following a record 36% surge the previous week. As the conflict involving Iran enters its second week, oil markets face further risks of disruption, with major producers cutting output, storage hubs nearing capacity, and traffic through the Strait of Hormuz effectively halted.
On Monday, US stock index futures dropped 1.5%, and Asian equities also appeared set to open lower. The US dollar strengthened against all G10 currencies.
Rising oil prices pushed inflation expectations higher, driving the yield on Australia’s 3-year government bonds to their highest level since July 2011.
Dave Mazza, CEO of Roundhill Financial, commented, “This is no longer just about the effective closure of the Strait of Hormuz—it’s about supply chain disruptions spreading deeper into the region. This shift could prompt already uneasy investors to further reduce risk exposure.”
Last week, worsening geopolitical tensions added new stress to markets already strained by concerns over AI disruption and potential cracks in credit markets. A wave of selling swept across regions and asset classes.
The escalating crisis leaves investors caught between the risk of renewed inflation driven by high oil prices and signs of a cooling US labor market, which could reinforce the need for monetary easing.
On Sunday, Iran intensified attacks on neighboring Middle Eastern countries, while Israel struck fuel depots in Tehran and threatened Iran’s power grid. US President Donald Trump warned that the US would consider strikes on previously off-limits areas, stating on social media that attacks would continue “until they surrender, or more likely, collapse entirely.”
The CBOE Volatility Index (VIX), a measure of expected S&P 500 price swings, surged to near 30 on Friday, pushing spot prices above three-month futures—the largest inversion in nearly a year.
Michael O’Rourke, chief market strategist at JonesTrading, said, “The worst of the stock market reaction is still ahead. I expect risk-off sentiment to intensify until we see some concrete positive news.”
Meanwhile, US data released on Friday showed nonfarm payrolls fell by 92,000 last month, one of the largest declines since the pandemic began. While some of the drop was expected—due to temporary factors like healthcare worker strikes and possible weather impacts—job losses were seen across multiple sectors. The unemployment rate rose to 4.4%.
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