Global financial markets tumbled on Monday as the intensifying conflict involving the United States, Israel, and Iran sent crude oil prices soaring above US$120 per barrel, sparking widespread risk aversion among investors.
The escalation, which has targeted critical energy infrastructure and effectively halted transit through the Strait of Hormuz, a key shipping route for roughly 20 percent of the world’s oil supply, triggered sharp declines across major markets in Asia, Europe, and the United States. US equity futures indicated a weak start to the week, while Asian shares plummeted and European indices opened deep in the red.
“There’s a good chance that we’re seeing one of the most sudden increases in the cost of oil to the global economy ever,” warned Warren Hogan, an economic adviser at Judo Bank. Brent crude has risen roughly 30 percent this month alone, pushing its 2026 gains past 70 percent, according to analysts.
The market turmoil has prompted a classic “flight to safety,” with the US dollar and Swiss franc gaining strength as investors move away from volatile equities. In commodities, oil surged over 25 percent following output curbs by Middle Eastern producers, reviving memories of the 2022 energy crisis when geopolitical tensions and supply chain disruptions drove global inflation sharply higher.
The spike in energy prices complicates policy decisions for the Federal Reserve. Recent data from February showed a decline of 92,000 non-farm payroll jobs and a rise in the unemployment rate to 4.4 percent, according to ForexTime, a global online broker. Lee Hardman, a senior currency analyst at MUFG, said, “The combination of a still-weak US labour market and an energy price shock is putting the Fed in an even more difficult position when setting policy.” Market participants are now pricing in only a 50 percent chance of two rate cuts in 2026, as soaring energy costs heighten inflation risks.
Commodity-producing nations face mixed fortunes. In Nigeria, where oil accounts for the majority of export revenue, higher crude prices could boost government earnings. However, Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, warned of domestic challenges: “Energy costs have a strong multiplier effect. Rising pump prices feed directly into food distribution and manufacturing. Inflationary pressure intensifies, and households feel it immediately.”
Precious metals markets have offered little respite. Gold has struggled to gain traction despite global uncertainty, held back by a broadly stronger US dollar. Technical analysts are closely watching $5,000 per ounce as a key support level, with some warning that a breach could signal further losses, while others expect it to hold.
Governments and oil suppliers are exploring options to release strategic reserves to stabilise the market. Yet the duration and severity of the conflict will largely dictate global economic performance for the rest of the year. Analysts caution that sustained disruptions through the Strait of Hormuz could push the global economy toward stagflation a combination of slow growth and high inflation reminiscent of past energy crises.
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As investors assess incoming data, including the US February Consumer Price Index (CPI) and January Personal Consumption Expenditure (PCE) index, uncertainty remains high. The unfolding geopolitical situation underscores the fragility of global markets in the face of sudden energy shocks and the interconnectedness of commodity supply chains with financial stability.
