Global markets slide as Iran war fears spike oil prices, hammer stocks

Global markets slid Tuesday as a widening war with Iran rattled investors, sending oil prices sharply higher and weighing on stocks from Asia to Europe and the United States amid fears of prolonged economic damage.

Oil Prices and Energy Market Reaction

Oil prices surged as Iran struck the U.S. Embassy in Saudi Arabia and widened its targets to include areas critical to global oil and natural gas production.

Brent crude, the international benchmark, jumped 7.8% to $83.79 per barrel, up from close to $70 less than a week earlier. Benchmark U.S. crude rose 7.6% to $76.63 per barrel.

Brent crude has climbed more than 15% this week to above $80 per barrel, reflecting heightened concern about potential disruptions to energy supplies.

Much of the market’s anxiety centers on the Strait of Hormuz, a narrow passageway off Iran’s coast through which roughly one-fifth of the world’s oil passes. Iranian Brig. Gen. Ebrahim Jabbari declared that “the Strait of Hormuz is closed” and warned ships passing through would be set on fire.

U.S. Stock Market Response

On Wall Street, the S&P 500 fell 1.6% in midday trading after dropping as much as 2.5% earlier in the session.

The Dow Jones Industrial Average was down 840 points, or 1.7%, as of 11:30 a.m. Eastern time, while the Nasdaq composite declined 1.7%.

Nearly 90% of stocks in the S&P 500 fell. Influential Big Tech stocks were unable to cushion the broader market decline, with Nvidia down 1.7%.

Airlines were among the hardest hit sectors. American Airlines fell 3.1% and United Airlines dropped 2.4% amid concerns about rising fuel costs and war-related disruptions, including canceled flights.

Bond Market and Inflation Concerns

Treasury yields rose amid worries that higher energy costs could worsen inflation.

The yield on the 10-year Treasury briefly climbed above 4.10% before easing to 4.06%. That compares with 4.05% late Monday and 3.97% on Friday.

Higher yields can increase borrowing costs for households and businesses and put additional pressure on stock valuations.

Impact on Consumers

Rising crude prices quickly affected gasoline prices.

The average price for a gallon of gasoline in the United States jumped 11 cents overnight to about $3.11, according to AAA.

Higher energy costs could add further pressure to household budgets and business expenses.

Global Market Reaction

The sell-off spread worldwide, particularly affecting energy-importing nations.

In South Korea, the Kospi plunged 7.2% for its worst day since two summers ago.

Tokyo’s Nikkei 225 dropped 3.1%.

In Europe, Germany’s DAX fell 3.6% as natural gas prices rose amid the conflict.

United Kingdom Economic Outlook

The conflict cast uncertainty over Britain’s economic outlook ahead of Treasury chief Rachel Reeves’ Spring Statement.

The statement had been expected to be relatively low-key, with key economic indicators broadly heading in the right direction and no major tax or spending decisions anticipated.

Economists warned the war could depress growth, stoke inflation and increase debt in the United Kingdom if higher oil and gas prices are sustained.

“With the world plunged into fresh uncertainty, she is likely to strike a highly cautious tone,” said Susannah Streeter, chief investment strategist at Wealth Club.

Market Outlook