BY COMFORT OGBONNA
Global financial markets were jolted Monday after coordinated U.S. and Israeli strikes on Iran escalated tensions in the Middle East, triggering a sharp rise in oil prices and broad declines in equity futures. Investors reacted swiftly to the heightened geopolitical risk, sending U.S. stock futures down more than 1% while energy markets surged on fears of supply disruptions.
Futures for the S&P 500 tumbled 1.4%, while contracts tied to the Dow Jones Industrial Average fell 1.2%, pointing to a weaker open on Wall Street. The sell-off followed a cautious close on Friday, when the S&P 500 slipped 0.4%, marking only its second losing month in the past ten, while the Dow dropped 1.1% and the Nasdaq composite declined 0.9%.
Across Asia, markets largely mirrored the anxious mood, though performance varied by region. In mainland China, the Shanghai Composite rose 0.5% to 4,185.29, buoyed by gains in major energy companies that benefited from surging crude prices. Oil giants such as CNOOC, China Petroleum & Chemical, and PetroChina hit their 10% daily trading limits as investors anticipated stronger revenues from higher global oil prices.
In contrast, Hong Kong’s Hang Seng dropped 2% to 26,102.53. Japan’s Nikkei 225 initially plunged more than 2% before trimming losses to close down 1.4% at 58,057.24. Defense-related shares helped cushion the decline, with companies such as Mitsubishi Heavy Industries and IHI Corp. advancing on expectations of increased military spending amid the intensifying conflict.
India’s BSE Sensex fell 1.8%, reflecting concerns that disruptions in Middle Eastern oil supplies could weigh heavily on the country’s energy imports. Taiwan’s benchmark index declined 0.9%, Singapore’s market slid 1.9%, and Thailand’s SET index fell 1.9%. Australia’s S&P/ASX 200 managed to close flat at 9,200.90, while markets in South Korea were shut for a public holiday.
Oil markets experienced some of the most dramatic moves. Traders are increasingly betting that crude exports from Iran and potentially other Gulf producers could slow significantly or halt altogether. Attacks in the region, including strikes on vessels navigating the **Strait of Hormuz**, have intensified fears of supply bottlenecks. The strategic waterway handles roughly one-fifth of the world’s oil and liquefied natural gas shipments, making it one of the most critical chokepoints in the global energy system.
U.S. benchmark crude initially surged about 8% and was up 7.5% by mid-afternoon in Tokyo at $72.06 per barrel. Brent crude climbed 8% to $78.69 per barrel. Analysts warn that a prolonged conflict could push fuel prices even higher, increasing transportation and manufacturing costs worldwide and adding fresh inflationary pressure to an already fragile global economy.
Iran exports around 1.6 million barrels of oil per day, much of it destined for China. Any prolonged disruption could force Beijing to seek alternative suppliers, potentially driving prices higher still. Estimates suggest China’s strategic oil reserves range between 1.1 billion and 1.2 billion barrels — roughly equivalent to 100 days of imports — providing some buffer but not immunity from sustained supply shocks.
Gold, traditionally seen as a safe-haven asset during times of uncertainty, jumped 2.7% to approximately $5,392 per ounce as investors sought protection from volatility. The U.S. dollar also strengthened, rising to 156.99 Japanese yen from 156.27 yen late Friday, while the euro edged lower to $1.1732 from $1.1762.
Despite the sharp market reaction, some analysts noted that the impact was partially muted because investors had anticipated heightened tensions following a significant buildup of U.S. forces in the region. Many traders had already adjusted their portfolios to hedge against the risk of military escalation.
Meanwhile, attention has shifted away from the artificial intelligence-driven rally that dominated markets in recent months. Instead, geopolitical instability and inflation concerns are once again front and center. A report released Friday showed U.S. wholesale inflation running at 2.9% last month, well above economists’ expectations of 1.6%. The data may complicate the outlook for the Federal Reserve, which has been weighing when to cut interest rates.
Lower interest rates would typically stimulate economic growth and support higher stock valuations, but policymakers remain wary that easing monetary policy too soon could reignite inflation. Bond markets reflected the cautious mood, with Treasury yields declining as investors sought safety in government debt.
With energy markets on edge and global investors bracing for further developments, the trajectory of the conflict and its potential impact on oil flows through the Middle East is likely to remain the dominant force shaping financial markets in the days ahead.
Original article
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