Crude oil futures surged more than 30% Sunday, briefly exceeding $117 a barrel, as escalating conflict in the Middle East stoked fears of significant disruptions to global oil supplies. U.S. Stock market futures plummeted in response, with the Dow Jones Industrial Average falling more than 1,000 points, or 2.5%, in overnight trading.
The price spike followed a weekend of retaliatory strikes between Israel and Iran, including Israeli attacks on four oil storage facilities in Tehran and Iranian strikes on a water desalination plant in Bahrain. According to Dow Jones Market Data, West Texas Intermediate crude peaked at $118.88 a barrel, the highest level since June 2022. If sustained, this would represent the largest one-day dollar and percentage gain for WTI since April and May 2020, respectively.
“Concerns that the strait [of Hormuz] being shut for some period of time could push oil prices to $150 a barrel or higher seems to be the driving force of what’s going on,” said Phil Flynn, senior market analyst at the Price Futures Group. He added that the attacks on Iranian infrastructure “have really got this surge moving.”
Asian markets also reacted sharply to the escalating tensions, with Japan’s Nikkei 225 down more than 7% and South Korea’s Kospi off almost 8%. Gold and silver futures declined, while Bitcoin slumped to around $66,000. The U.S. Dollar Index, measuring the dollar against a basket of currencies, rose 0.6%.
The Dow Jones Industrial Average ended last week down 3%, its worst weekly performance since President Donald Trump announced “liberation day” tariffs nearly a year ago. The S&P 500 and Nasdaq Composite also experienced declines, falling 2% and 1.2% respectively.
Adding to the geopolitical uncertainty, Iranian state TV announced that Mojtaba Khamenei, son of Ayatollah Ali Khamenei who was killed in a strike last week, had been named the country’s new supreme leader.
U.S. Energy Secretary Chris Wight stated on CNN’s “State of the Union” that he anticipates a resumption of regular ship traffic through the Strait of Hormuz “before too long,” estimating a “worst-case” scenario of “a few weeks… not months.” The Trump administration has offered up to $20 billion in reinsurance for tankers to resume navigating the strait, though the adequacy of this amount has been questioned.
Analysts warn of potential economic consequences. Stephen Innes, managing partner at SPI Asset Management, stated that oil prices above $100 “becomes a tax on the global economy,” potentially adding 0.7 percentage points to global inflation and subtracting 0.4 percentage points from economic growth. This raises concerns about stagflation – a combination of high inflation, slow economic growth, and rising unemployment.
U.S. Gasoline prices jumped nearly 27 cents a gallon last week, according to AAA. February’s consumer-price index is due to be released Wednesday, and January’s delayed personal-consumption expenditures index will follow on Friday.
The Federal Reserve is scheduled to meet to discuss interest rates on March 17-18, but is widely expected to hold rates unchanged. Wedbush analysts characterized the current situation as representing “near-term volatility, not structural market damage,” but noted that “market risk is building” and that “de-escalation in the Mideast and private credit may be necessary for the market to regain its footing.”
Several Iranian Red Crescent facilities, including relief posts and warehouses, have sustained significant damage since the conflict began a week ago, according to the International Federation of Red Cross and Red Crescent Societies. The IFRC reported that communities are experiencing deaths, injuries, and damage to essential infrastructure.
