Escalating U.S.–Iran conflict and oil price spike rattle global markets

Global stock markets are under heavy pressure today as a sharp escalation in U.S.–Iran military conflict drives a spike in oil prices, stokes inflation fears, and triggers a broad risk-off move across regions. The United States has launched a military operation against Iran that was initially expected to last 48 hours but is now projected to extend 4–5 weeks. Iran has responded by striking the U.S. Embassy in Saudi Arabia and targeting areas critical to global oil and natural gas production, raising the risk of sustained disruption to energy supplies. Markets are particularly focused on the Strait of Hormuz, a key chokepoint through which roughly one-fifth of the world’s oil flows; any impairment there could significantly tighten global supply. Energy markets are reacting sharply: Brent crude has jumped more than 7% and U.S. crude over 8%, with prices moving closer to levels that historically have fed directly into higher inflation and weaker consumer spending. This surge in oil is feeding through to expectations that inflation could re-accelerate or remain elevated for longer, complicating the outlook for central banks that had been expected to cut interest rates later this year. In bond markets, U.S. Treasury yields are edging higher, with the 10‑year yield moving above prior-day levels as investors demand more compensation for inflation risk. Higher yields increase borrowing costs for governments, companies, and households, and they tend to weigh on equity valuations, particularly in more rate-sensitive sectors. Equity markets are seeing a broad-based selloff as investors move away from risk assets. In the U.S., nearly 86% of stocks are declining, and volatility has spiked to its highest point in more than three months. The risk-off sentiment is global: major indices in Asia and Europe are down sharply, with South Korea’s Kospi plunging over 7%, Japan’s Nikkei falling more than 3%, and European regional benchmarks lower by roughly 3–5%. Travel-related sectors such as airlines are under additional pressure due to rising fuel costs and flight disruptions. Overall, the combination of geopolitical escalation, surging oil prices, rising yields, and heightened volatility is driving a defensive tone in markets worldwide, with investors bracing for a prolonged period of uncertainty and potential delays to anticipated interest-rate cuts.