Oil shock and Iran tensions rattle global markets and fuel risk-off trading

Global markets are under heavy pressure today as a sharp surge in oil prices, driven by geopolitical tensions around Iran, ripples across stocks, bonds, and currencies. Crude oil has jumped past $100 per barrel and is approaching $120, as investors worry that the Strait of Hormuz—a key route for a large share of the world’s oil shipments—could face disruption following Iran’s appointment of a new Supreme Leader. This potential supply shock is raising fears of higher and more persistent inflation just as central banks were expected to move toward interest-rate cuts. Equity markets worldwide are sliding into correction territory, with some markets, such as South Korea, even triggering circuit breakers as selling accelerates. The risk-off mood is broad-based: investors are pulling back from riskier assets amid uncertainty over how long oil prices will stay elevated and how severely global growth could be hit if energy costs remain high. Bond markets are also under strain. U.S. Treasury prices are falling as traders reassess the outlook for interest-rate cuts, now worried that higher energy prices could keep inflation elevated for longer. This combination of inflation concerns and growth fears is creating a challenging backdrop for both stocks and bonds. In currency markets, the U.S. dollar is strengthening as investors seek safety, while the Japanese yen has weakened to around 158 per dollar, underscoring the flight to perceived safe-haven assets and the stress across global markets. Overall, today’s trading is being driven primarily by geopolitical risk in the Middle East, its impact on oil supply and inflation expectations, and the resulting shift away from risk assets into safer havens.