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Global financial markets have plunged into turbulence as escalating conflict in the Middle East has triggered sharp spikes in energy prices and renewed fears of inflation across major economies.
Stock markets across Europe and Asia fell sharply on Monday while oil prices surged above $100 a barrel for the first time since Russia’s invasion of Ukraine in 2022. The spike followed retaliatory strikes by Iran against crude-producing Gulf nations, further intensifying concerns about global energy supply.
International benchmark Brent crude and the United States’ West Texas Intermediate both climbed close to 15 per cent by midday in Europe after earlier surging nearly 30 per cent. The dramatic movement in oil prices quickly rippled through global financial markets.
“The spike in the oil price is dominating global financial markets,” said Kathleen Brooks, research director at trading group XTB. She warned that the rising cost of fuel could place renewed pressure on households and financial systems already facing inflation.
United States President Donald Trump described the surge in oil prices as a necessary consequence of confronting Tehran. Speaking over the weekend, he said the price spike was “a small price to pay” in efforts to eliminate Iran’s nuclear threat, as hostilities show little sign of easing.
Meanwhile, Iran has intensified its military response following the appointment of Ayatollah Mojtaba Khamenei as the country’s new supreme leader, succeeding his father. The leadership transition was marked by a fresh barrage of missiles targeting Israel and the Gulf states.
The conflict has also disrupted maritime traffic in the Strait of Hormuz, a critical energy chokepoint through which roughly one-fifth of global crude oil passes. Shipping through the narrow waterway has largely halted since the war began on February 28.
With energy supplies under pressure, leaders of the Group of Seven industrialised nations are discussing the possibility of releasing emergency oil reserves to stabilise markets. French President Emmanuel Macron confirmed that “the use of strategic reserves is an option being considered.”
The surge in fuel costs has also weighed heavily on equities. The Paris stock market dropped around two per cent, Frankfurt fell 1.6 per cent, and London slipped 1.2 per cent, although energy and defence stocks recorded gains.
Brooks cautioned that the economic consequences could extend beyond financial markets. “The rise in petrol costs is acting as a major drag on equity prices and if oil prices continue to move higher this week, then the pumps will move with it,” she said, warning that “the cost of living crisis is back.”
In Asia, markets recorded some of their steepest losses this year. Seoul closed down six per cent, Tokyo dropped more than five per cent, while Taipei lost over four per cent. Hong Kong and Shanghai also ended the day sharply lower.
