Global markets faced significant turmoil Friday as fears of oil supply disruptions, fueled by escalating U.S.-Iran tensions, sent stocks and U.S. futures tumbling. Benchmark oil prices surged to their highest levels in nearly two years, prompting a reassessment of interest rate cut expectations and raising concerns for the global economy.
European stocks on the STOXX 600 index dropped, while U.S. futures for the S&P 500 and Nasdaq also saw declines. The volatility followed a stark warning from Qatar's energy minister, who projected that Gulf energy producers could halt exports within weeks, potentially driving oil prices to $150 a barrel and causing significant economic damage.
U.S. crude oil prices climbed over 5% to $86.22 a barrel, with Brent crude reaching $89.48. Both were on track for substantial weekly gains, the largest since the COVID-19 crisis in 2020.
In response to the energy market shock, traders have significantly scaled back bets on U.S. Federal Reserve interest rate reductions. Predictions for this year have fallen from approximately 55 basis points to 30-35 basis points. U.S. 10-year Treasury yields also rose, marking their largest weekly increase since April 2025.
Europe, heavily reliant on energy imports, felt the impact most acutely. Traders now anticipate potential interest rate hikes by the European Central Bank this year, reversing earlier expectations of cuts. Similarly, the Bank of England faces reduced odds of rate cuts.
This market uncertainty, driven by oil price movements and inflation expectations, is expected to sustain elevated volatility. Investors sought the safety of cash as the conflict in the Middle East showed signs of prolonged duration. The U.S. dollar index strengthened, while global stock indices faced their most significant weekly drops in over a year.