G7 finance ministers failed to reach an agreement on releasing emergency oil reserves Monday, despite discussions aimed at easing fears of an impending shortage. France's Roland Lescure stated the group was "not there yet" on a deal. The International Energy Agency (IEA) had explicitly requested the coordinated release during the G7 meeting.
Brent crude briefly surged to $119.50 a barrel, its highest level since 2022, after jumping approximately 25% since Friday as the Iran war intensified, raising concerns over global production and shipping. Oil prices later pared gains, trading below $100 a barrel amidst high market volatility.
Global stock markets declined on concerns that the world economy could not withstand a sustained oil price shock. The S&P 500 fell 1.3%, the Dow Jones Industrial Average dropped 1.5%, and the Nasdaq composite was 1.2% lower at Monday's open.
Companies with significant fuel expenses, such as Carnival, United Airlines, and Old Dominion Freight, saw notable stock drops. Retailers like Best Buy and Williams-Sonoma also struggled as consumers faced higher gasoline costs.
Financial markets are now focused on the duration and extent of high oil prices. Sustained elevated prices could strain household budgets already impacted by inflation and increase operating costs for businesses, potentially leading to stagflation - a scenario of economic stagnation coupled with high inflation.
U.S. Treasury 10-year yields held steady at 4.15%, influenced by conflicting pressures of high inflation and the risk of economic slowdown. Recent weak U.S. jobs data further deepened concerns about stagflation.