Will the Iran Conflict Send Oil Prices and Global Markets Into Fresh Turmoil?

Source: Kapitales Research

Highlights:

• Oil prices surge amid conflict: Brent crude has jumped about 40% since the end of February, at the time of writing, as US strikes near Iran’s key export hub at Kharg Island raised fears of supply disruptions.
• Global markets feel the pressure: Rising energy prices have pushed US Treasury yields to around 4.28%, at the time of writing, strengthened the US dollar, and weighed on global equities.
• Volatility increases across assets: Global stocks have fallen more than 5% since the conflict began, at the time of writing, while investors closely monitor markets as trading resumes in New York.

Energy Markets React to Escalating Middle East Tensions

Brent crude, the global benchmark for oil prices, has become the centre of investor attention after reports of US strikes near Kharg Island, Iran’s primary oil export hub. The development has heightened concerns about potential disruptions to crude supplies from the Middle East, a region responsible for a large share of the world’s oil production. When trading resumes in New York, markets will be closely watching movements in energy prices, US equity futures, and government bonds. Trading in US equity futures, Treasury securities, and oil contracts is scheduled to restart at 6 p.m. Sunday in New York (9 a.m. Monday AEDT), at the time of writing, setting the stage for a potentially volatile session.

Oil Rally Sends Shockwaves Through Global Markets

Energy prices have surged sharply since the conflict began more than two weeks ago, with Brent crude rising roughly 40% since the end of February, at the time of writing. The rally has triggered broader market reactions, lifting the US dollar and pushing Treasury yields higher as investors grow concerned about renewed inflation pressures. The US military strikes reportedly targeted installations near Kharg Island, from where Iran exports the majority of its crude oil. Any prolonged disruption to this infrastructure could significantly tighten global oil supplies and amplify price volatility.

Justin Lin, investment strategist at Global X ETFs Australia, warned that the escalation could sustain higher energy prices for longer and increase both inflation risks and economic uncertainty. According to Lin, the restoration of oil flows will largely depend on whether critical infrastructure remains operational.

Market Volatility Intensifies Across Asset Classes

Signs of stress are already emerging across global markets. A Bank of America index measuring cross-asset volatility has risen close to its highest level in months, at the time of writing, reflecting growing investor anxiety. Global equity markets have also felt the pressure, with world stocks falling more than 5%, at the time of writing, since the conflict began. The S&P 500 Index has recorded three consecutive weekly declines and is about 5% below its January peak, at the time of writing.

In bond markets, 10-year US Treasury yields reached around 4.28%, at the time of writing, highlighting rising concerns that higher energy costs could prolong inflation and complicate the outlook for global economic growth.

Note- All data presented is based on information available at the time of writing.

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