US Stocks Slide as Oil Prices Surge 13% Amid Escalating Middle East Conflict
Global financial markets are witnessing sharp volatility as escalating tensions in the Middle East trigger a surge in crude oil prices, a stronger US dollar, and a broad retreat from risk assets.Wall Street Futures Fall While Asian Markets Advance
US equity futures declined sharply, with both the S&P 500 and Nasdaq 100 futures falling 1% as investors reacted to rising geopolitical uncertainty. The selloff reflects mounting concerns over the widening military action in Iran and its potential to disrupt global trade routes and energy supplies.In contrast, Asian equities rose 1.3%, even as global markets remained cautious.
Crude Oil Jumps 13% on Strait of Hormuz Disruption Fears
Benchmark crude oil prices surged 13% before paring some gains, as the conflict effectively halted tanker movement through the Strait of Hormuz. The waterway, which carries about one-fifth of global oil flows, is considered a critical energy choke point for global markets.Digital tracking data indicates that oil tanker traffic through Hormuz has nearly come to a standstill. Three vessels were attacked near the mouth of the Persian Gulf, intensifying fears of tightening supply. Although Iran has stated that it does not intend to close the passage, concerns over disruptions continue to dominate market sentiment.
According to Bloomberg Economics, a full closure of the Strait of Hormuz could push oil prices as high as $108 per barrel, significantly raising inflationary pressures worldwide.
Safe Haven Assets Rally as Investors Shun Risk
As risk appetite weakened, investors shifted capital toward safe-haven assets.US Treasury bonds gained, pushing the 10-year yield to its lowest level since April and the 5-year yield to its lowest point since October 2024. Gold prices climbed 1.6%, trading near $5,360 per ounce.
The US dollar strengthened against almost all Group of 10 currencies, underscoring heightened demand for safety and liquidity.
Markets Grapple with Inflation and Valuation Risks
The escalation in military activity adds to existing concerns over high stock market valuations, artificial intelligence-driven speculation, and potential credit risks. Markets are now contending with the possibility of disrupted global shipping and restricted travel across the Gulf region.Last month, US equities recorded their steepest decline since April, and the renewed surge in oil prices is expected to intensify concerns over inflation.
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