More than a week after the United States and Israel launched strikes on Iranian nuclear and military infrastructure, the conflict is sending shockwaves through global markets.
Energy markets reacted sharply after Iran effectively closed the Strait of Hormuz, the narrow waterway through which around 20% of global oil supply passes. Brent crude surged almost 5% to about US$85 a barrel, while West Texas Intermediate jumped 8.5% to US$81, as attacks on regional infrastructure forced shutdowns of Qatar’s LNG industry and parts of Iraq’s oil sector.
Because oil underpins transport, logistics and manufacturing supply chains, sustained price increases can push up the cost of goods across the global economy, raising concerns that inflation could accelerate again.
Global markets have already started to adjust. The S&P 500 fell 1.3% and the Dow dropped 3% for the week, while the ASX 200 slid 1.3% on Friday, extending losses this week. In bond markets, the US 10-year yield climbed, with traders now assigning a 25% probability that the Federal Reserve delivers no rate cuts this year.
With Iran continuing retaliatory strikes despite signalling restraint, investors now face a key question: whether energy supply disruptions prove temporary, or whether escalating tensions push oil, inflation, and interest rates higher for longer.
