Oil prices surged and stock markets slid Monday as a protracted military conflict in the Middle East intensified. Brent crude jumped 4.5% to $76.07 a barrel, while U.S. crude climbed 3.9% to $69.59. Gold also rose 1.0% to $5,327 an ounce.
Military actions by the United States and Israel against Iran, met with regional missile responses, risk drawing in neighboring countries. Analysts warn of a significant upward repricing of oil if de-escalation does not occur swiftly, potentially reigniting global inflation.
The Strait of Hormuz, a critical artery for global oil and natural gas trade, has seen traffic halt, with tankers rerouting due to heightened risks and insurance issues. Experts warn of an "effective halt" of 15 million barrels per day of crude oil impacting markets.
While OPEC+ agreed to a modest output boost, the delivery of this oil remains a concern. The situation draws comparisons to the 1970s oil embargo, which saw prices triple.
Global markets reacted swiftly. Asian shares outside Japan fell 1.2%, European futures indicated significant drops, and U.S. stock futures also trended lower. The U.S. dollar benefited, strengthening against the euro and yen, as investors gravitated towards perceived safe-haven assets. U.S. Treasury yields stabilized after earlier declines.
Separately, financial jitters were amplified by the administration of UK mortgage lender MFS, raising wider credit concerns. Investors also face a week of crucial U.S. economic data, including manufacturing surveys, retail sales, and the jobs report, which could influence Federal Reserve rate cut expectations.