Escalating military tensions in the Middle East sent oil prices soaring on Monday as investors fled to safer investments amid concerns the conflict could drag on for weeks.
Brent crude oil prices leaped 9% to reach $79.42 per barrel, while U.S. crude oil climbed 8.6% to $72.61 per barrel. Gold also gained ground, rising 1.4% to $5,350 an ounce as investors sought refuge from market volatility.
The price spike comes as military operations involving the United States and Israel against Iran continue with no signs of de-escalation, while Iran has responded with missile attacks throughout the region, raising fears neighboring countries could be drawn into the fighting.
In an interview with the Daily Mail, President Donald Trump indicated the conflict might persist for another four weeks, stating on social media that attacks would continue until American goals are achieved.
Market attention has focused on the Strait of Hormuz, a critical shipping lane through which approximately one-fifth of global seaborne oil and 20% of liquefied natural gas passes. Though the waterway remains open, ship tracking data reveals tankers accumulating on both sides, with crews either fearful of attacks or unable to secure voyage insurance.
“The most immediate and tangible development affecting oil markets is the effective halt of traffic through the Strait of Hormuz, preventing 15 million barrels per day (bpd) of crude oil from reaching markets,” said Jorge Leon, head of geopolitical analysis at Rystad Energy.
“Unless de-escalation signals emerge swiftly, we expect a significant upward repricing of oil.”
Extended high oil prices could reignite inflation worldwide while acting as an additional cost burden on businesses and consumers that might reduce economic demand.
OPEC+ members agreed Sunday to a modest production increase of 206,000 barrels daily for April, though much of that oil must still navigate Middle Eastern shipping routes by tanker.
“The nearest historical analogue in our view is the Middle East oil embargo of the 1970s, which increased oil prices by 300% to around $12/bbl in 1974,” said Alan Gelder, SVP of refining, chemicals and oil markets at Wood Mackenzie.
“That is only US$90/bbl in 2026 terms. Eclipsing this in today’s market concerned about significant losses of supply seems very achievable.”
The oil shock would particularly impact Japan, which relies entirely on imported oil, contributing to a 1.1% decline in Nikkei futures.
U.S. stock markets also felt the pressure, with S&P 500 futures dropping 0.8% and Nasdaq futures falling 0.9%.
Currency markets reflected the oil price shock as the dollar weakened 0.2% against the safe-haven Swiss franc to 0.7673. However, since America exports more energy than it imports, and U.S. Treasury bonds remain attractive during uncertain times, the dollar found some support, pushing the euro down 0.3% to $1.1780.
The Japanese yen’s typical safe-haven status was complicated by Japan’s complete dependence on oil imports, leading to mixed currency flows. The dollar gained 0.2% to 156.31 yen while rising significantly against the Australian dollar, which traders often sell during periods of global uncertainty.
In bond trading, 10-year Treasury futures strengthened 3 ticks, with yields having dropped below 4% last week for the first time since late November.
Bond prices had already received a boost Friday when UK mortgage company MFS entered administration following accusations of financial misconduct. The firm’s collapse raised broader credit concerns, as major banks were among its lenders. MFS had outstanding debts of 2 billion pounds ($2.69 billion).
The banking sector news, combined with concerns about artificial intelligence-related stocks, weighed on Wall Street more broadly.
Investors must also navigate a busy week of U.S. economic releases, including the ISM manufacturing survey, retail sales figures, and the closely watched employment report.
Weak economic data could undermine confidence following a disappointing fourth quarter, but might also increase expectations for Federal Reserve interest rate cuts.
Current market pricing suggests a 53% probability of rate reduction in June and approximately 60 basis points of cuts throughout the year.
