Oil prices surged and stock markets slid on Monday as escalating conflict in the Middle East threatened to disrupt the global economy and reignite inflation. Brent crude jumped 6.4% to $77.57 a barrel, and U.S. crude climbed 6.2% to $71.17. Safe-haven gold rose 1.6% to $5,360 an ounce.
Military strikes in the region show no sign of abating, with concerns focused on the Strait of Hormuz, a vital artery for global oil and natural gas trade. While not yet blocked, tankers are rerouting due to insurance and security risks, effectively halting traffic and potentially impacting 15 million barrels per day. Analysts warn of significant upward repricing of oil if de-escalation does not occur swiftly.
A prolonged spike in oil prices could reintroduce inflationary pressures and dampen consumer and business demand. Despite OPEC+'s modest output increase, the logistical challenges of moving oil out of the Middle East are significant.
Global markets reacted negatively. Japan's Nikkei fell 1.3%, with airlines particularly hard hit. Chinese blue-chips saw a minor dip, while other Asia-Pacific shares declined. European and US futures also showed losses across major indices.
The dollar benefited from the turmoil, strengthening against the euro and yen. Bond yields stabilized after a brief dip. The market also digested news of a UK mortgage lender's collapse, which had previously impacted banking stocks and broader Wall Street sentiment.