Oil prices hit multi-week highs and global stocks fell as Houthi attacks and US troop fears intensified the Iran war, threatening key trade routes
HONG KONG: Oil prices surged and global stocks mostly fell on Monday as the Middle East conflict escalated. Investor anxiety grew over the potential for a wider war, including possible US ground troop deployment.
The crisis entered its fifth week with heightened fears of regional spillover. Yemen’s Houthi rebels claimed to have fired “a barrage of cruise missiles and drones” at strategic Israeli sites on Saturday.
This raised immediate concerns over the security of Red Sea shipping lanes. Saudi Arabia has reportedly rerouted much of its oil exports to avoid the Strait of Hormuz.
Approximately 20% of global crude and gas passes through the Strait, which has been effectively closed by Tehran. The news propelled oil prices to their highest level since the US-Israel campaign against Iran began.
Both main crude contracts jumped more than 3% at one point. Brent crude approached $117 a barrel before paring some gains.
The market’s dour mood was compounded by remarks from US President Donald Trump. He told the Financial Times he wanted to “take the oil in Iran” and could take Kharg Island “very easily”.
Kharg Island is a vital Iranian oil terminal located off the country’s west coast. The Pentagon is reportedly eyeing it for potential ground operations, though the US insists it would stop short of a full invasion.
“Maybe we take Kharg Island, maybe we don’t. We have a lot of options,” Trump told the FT. He added that such a move “would also mean we had to be there for a while.”
Diplomatic efforts appeared strained despite Pakistan’s offer to broker talks. Iran’s parliament speaker accused the US of “secretly planning a ground attack”.
The surge in oil and prospect of prolonged conflict pressured equity markets worldwide. Fears centred on a potential inflation spike that could hurt the global economy.
Tokyo’s index sank more than 4%, while Seoul dropped over 3% before recovering slightly. Hong Kong, Sydney, Mumbai, Bangkok, Wellington, Taipei, Jakarta, and Manila all traded lower.
European markets in London, Paris, and Frankfurt opened slightly down. The losses followed a sharp sell-off on Wall Street after US and Israeli strikes on Iranian nuclear sites.
“The market is now reacting to higher crude pricing and towards the fallout in the economic consequences,” wrote Pepperstone analyst Chris Weston.
He said higher short-term inflation expectations and volatility in rate markets were now front and centre. Growing concerns about supply shortages and their impact on economic data and corporate earnings are key drivers.
“The Houthi’s ability to disrupt shipping through the Bab al-Mandeb strait… is the new key risk,” Weston added. The strait accounts for roughly 12% of global trade.
“Any meaningful disruption, married with a sharp rise in insurance costs, could drive another leg higher in crude and further pressure risk assets.”
The selling pressure followed a relatively calm period last week. President Trump had delayed a threatened attack on Iran’s energy infrastructure, citing progress in talks.
“Trump’s decision to extend the pause in Iran’s energy sector… has clearly not been enough to support investor sentiment,” said Skye Masters of National Australia Bank. The focus has turned to the broader global economic impact of the shock, extending beyond oil to fertilizers, petrochemicals, and metals.
