Global stock markets moved cautiously on Monday while oil prices surged as tensions around the Strait of Hormuz raised fears of supply disruptions, clouding the inflation outlook and complicating decisions for central banks meeting this week.
Benchmark Brent Crude rose about 3.7 percent to around $106 per barrel, extending a sharp rally since the escalation of fighting in the Gulf. Oil had traded below $70 in late February and slipped under $60 earlier this year before the conflict sent energy markets soaring.
The jump in oil prices has forced investors to reassess expectations for global interest rates, with higher energy costs threatening to keep inflation elevated even as growth prospects weaken.
Investors are watching closely as several major central banks, including the Federal Reserve, European Central Bank, Bank of England, Bank of Japan and Reserve Bank of Australia, hold policy meetings this week.
Markets widely expect the Australian central bank to raise rates, while most others are likely to hold steady as policymakers assess the economic impact of the conflict.
More Read
Traders have already scaled back expectations for interest-rate cuts in the United States this year, with markets no longer fully pricing even one reduction by the Federal Reserve. At the same time, investors expect the European Central Bank could deliver at least one rate increase before the end of 2026.
“The key question is how long the conflict lasts and whether the shock in energy prices leads to second-round inflation effects,” analysts said, noting that prolonged high oil prices could force central banks to maintain restrictive policies for longer.
The Strait of Hormuz, a narrow passage linking the Gulf to the Arabian Sea, remains at the centre of market concerns. Roughly a fifth of the world’s oil supply passes through the waterway, making any disruption a major risk to global energy markets.
U.S. President Donald Trump has called for an international coalition to help reopen the strait and escort commercial shipping through the area.
However, allies including Japan and Australia signalled on Monday that they were not planning to send naval vessels to participate in such patrols.
Trump also said China should play a role in resolving the crisis before his planned meeting with Chinese President Xi Jinping in Beijing later this month.
In an interview with the Financial Times, Trump said he expected China to help unblock the waterway and warned he could postpone the trip if Beijing failed to assist.
The geopolitical tensions have rattled global equity markets, which have fallen sharply since the conflict began earlier this month.
Europe’s STOXX Europe 600 was broadly flat on Monday but remains down around six percent since the start of the crisis.
In the United States, the S&P 500 has fallen about 3.5 percent over the same period, although futures pointed to a modest rebound in early trading.
Asian markets showed a mixed performance. The MSCI Asia Pacific Index edged up around 0.3 percent, supported by gains in South Korea.
The country’s KOSPI, which has been one of the worst-performing major markets since the conflict began, rose about one percent on Monday but remains sharply lower for the month.
In China, the CSI 300 Index was little changed after official data showed retail sales and industrial output for January and February exceeded expectations, although the property sector continued to struggle with falling home prices.
Investors are also watching diplomatic efforts between Washington and Beijing. Senior officials from both countries are meeting in Paris to discuss possible agreements on agriculture, critical minerals and managed trade ahead of Trump’s planned visit to China.
For markets, analysts say the outlook will largely depend on whether the conflict in the Gulf escalates further or begins to ease.
A prolonged disruption to shipping in the Strait of Hormuz could push energy prices even higher, increasing the risk of slower growth and renewed inflation pressures across the global economy.
