Global Markets Plunge as Iran War Intensifies, Oil Prices Spike to $120
Wall Street futures followed global markets lower early Monday, with oil prices briefly spiking to nearly $120 per barrel as the intensifying Iran war threatens production and shipping in the Middle East. This dramatic surge in energy costs has sent shockwaves through financial markets worldwide, raising fears of renewed inflation and economic slowdown.
Sharp Declines in Stock Futures and Global Indices
Futures for the S&P 500, Nasdaq, and Dow Jones Industrial Average all fell more than 1% before the opening bell, after retreating over 2% late Sunday. The sell-off was mirrored across the globe, with Japan’s benchmark Nikkei 225 index plunging more than 5% and European markets losing between 2% and 3%. At midday in Europe, Germany’s DAX dropped 2.6%, the CAC 40 in Paris lost 2.7%, and Britain’s FTSE 100 was down 1.9%.
During Asian trading, Japan’s Nikkei 225 plunged more than 7% early in the day but regained some losses to close 5.2% lower at 52,728.72. South Korea’s Kospi sank 6% to 5,251.87, while Taiwan’s benchmark dived 4.4% and India’s Sensex lost 2.3%. Chinese markets, which tend to be less affected by global trends, saw more moderate losses, with Hong Kong’s Hang Seng falling 1.4% and the Shanghai Composite index losing 0.7%.
Oil Price Surge and Its Global Implications
As of 7:45 a.m. EDT, the price for a barrel of Brent crude was $104.94, and U.S. benchmark crude was trading at $103.27, both more than 13% above their closing prices Friday. The last time oil rose above $100 a barrel was shortly after Russia invaded Ukraine in 2022. Stephen Innes of SPI Asset Management noted, “The market woke up to the sound every macro trader dreads. The oil alarm bell. And this time it was not a polite chime. It was a fire siren.”
Surging oil and gas prices, if they persist, could ripple across the globe, further complicating matters for countries still adjusting to higher tariffs on exports to the United States under President Donald Trump. Ipek Ozkardeskaya of Swissquote commented, “Oil prices will reach a peak at some point – maybe they already have, maybe there’s more to come – but they are likely to fluctuate at elevated levels for weeks, perhaps months. Eventually – even if the war persists – energy prices will likely come down. But during this period, high energy prices will revive inflation globally and weigh notably on growth.”
Impact on Airlines and Regional Responses
Shares of major U.S. airlines continued their descent as spiking fuel prices are projected to eat into their profits. Delta, American, and United all fell more than 3% in premarket trading, adding to what was already double-digit losses since the U.S. and Israel launched their attack on Iran more than a week ago. The Iran war, now in its second week, has ensnared countries and places critical to the production and movement of oil and gas from the Persian Gulf.
Senior officials of Southeast Asian countries were meeting this week in Manila, the Philippines, where they were expected to discuss ways to counter the shock from higher energy costs. Meanwhile, South Korean President Lee Jae Myung warned against hoarding, panic buying, and collusion between refiners and gas stations, stating, “Please respond proactively to the growing volatility in the financial and foreign exchange markets, which are the lifeblood of our economy.” He said the government would cap fuel prices.
Escalating Conflict and Environmental Concerns
Both sides in the war struck new targets over the weekend, including civilian ones. Bahrain accused Iran of hitting one of the desalination plants crucial for drinking water in Gulf countries, and its national oil company declared force majeure after the country’s sole oil refinery was attacked. Israel struck oil depots in Tehran, sending up thick smoke and causing environmental alerts. A Chinese special envoy to the Middle East, Zhai Jun, called for an end to the attacks and said strikes on non-military targets and civilians should be condemned.
Early Monday, the U.S. dollar, which retains its status as a safe haven for investors bracing against uncertainty, gained against other major currencies. It was trading at 158.45 Japanese yen, up from 158.09 yen late Friday, while the euro rose to $1.1563. The only market to show gains was in oil exporter Norway, where its benchmark edged 0.1% higher, highlighting the uneven impact of the crisis across different economies.
