The Iran conflict has rattled financial markets, driving a surge in oil prices while causing declines in stocks and bonds. Market volatility has been dizzying. Here is a detailed look at how the Middle East conflict has impacted markets this month:
Crude Oil Oil prices have risen sharply since the outbreak of hostilities. The effective closure of the Strait of Hormuz, damage to Middle Eastern oil facilities, and uncertainty over the conflict's duration have collectively pushed prices higher. The global benchmark Brent crude rose 4.22% on Friday, closing at $112.57—its highest level since 2022. Before the U.S. and Israeli strikes on Iran on February 28, Brent was trading around $73 per barrel.
Stock Markets The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite are all headed for their worst monthly performance in a year. The Dow hit a record high on February 10, but since then the blue-chip index has fallen 10%, entering correction territory. The Nasdaq has also declined into correction territory. The S&P 500 is down 7.84% from its late-January peak. Soaring energy prices have forced central banks to scale back expectations for interest rate cuts, with some even opting to raise rates. Ed Egilinsky, Managing Director at Direxion, stated, "This conflict has dramatically altered the market landscape, creating a highly dynamic and unpredictable environment." Egilinsky added, "Investors should prepare for continued stock market volatility, with prices likely to swing significantly in both directions until clearer guidance emerges."
Bond Markets U.S. Treasury prices fell this month, pushing yields higher. The yield on the 10-year Treasury note, which influences borrowing costs across the economy, reached 4.48% on Friday—its highest level since July—before paring gains and closing at 4.43%. Bond yields have climbed as investors sold bonds, raised inflation expectations, and as the Federal Reserve held interest rates steady. This marks a clear shift from the start of the year, when markets were pricing in two Fed rate cuts for the year. Robert Tipp, Global Head of Bonds at PGIM Fixed Income, remarked, "This is exactly what keeps bond investors up at night." Tipp noted, "The market is beginning to question whether the Fed may not only refrain from cutting rates but could even consider raising them."
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