Recent escalations in the Middle East have sent shockwaves through global energy markets and financial assets, following Israeli drone strikes against Iranian natural gas plants and oil depots. These initial attacks on key South Pars gas facilities and an oil depot near Tehran, reported by Iranian state media and confirmed by The Jerusalem Post, came just two days after Israel had conducted air raids on Iran’s military leadership, missile sites, and nuclear infrastructure. The immediate consequence was a significant surge in oil prices: US crude oil jumped $2.72, a 3.7% gain, to close at $75.67 per barrel, while global benchmark Brent crude rose $3.67, up 4.94%, ending the day at $77.90. This rally compounded a massive 7% surge on Friday, marking the most volatile move in the oil market since Russia’s 2022 invasion of Ukraine, with US crude alone seeing a combined 13% gain last week.

The escalation did not cease with Israel’s offensive. Iran retaliated with missile strikes on a major refinery in Haifa, according to The Times of Israel, further intensifying concerns over global oil supplies. Tensions remain exceptionally high as the conflict entered its third day, with no clear indication of de-escalation from either side. A senior Iranian commander amplified these fears by threatening to shut the Strait of Hormuz, a critical chokepoint through which over 20% of global oil exports pass. Such a move could severely disrupt international energy logistics.

The ripple effects quickly spread to broader financial markets. Stock futures tumbled at market open, with Dow Jones Industrial Average, S&P 500, and Nasdaq 100 futures all dropping by approximately 0.2%. This followed a brutal Friday session where the Dow plummeted over 700 points, resulting in all three major indexes finishing the week in the red: Dow down 1.3%, S&P 500 lower by 0.4%, and Nasdaq Composite closing with a 0.6% loss. Investors sought safety, leading to a strong rally in gold, which reached $3,450. Global currencies experienced volatility, with the euro falling 0.39% against the dollar to 1.1555, the British pound dropping 0.45% to 1.3565, and the Japanese yen rising 0.66% to 144.14 per dollar. The Canadian and Australian dollars also slid.

In contrast to the broader market turmoil, the cryptocurrency market largely remained muted. At press time, Bitcoin saw a slight decrease of 0.32% to $105,182, while Ethereum was up 0.15% to $2,538. Cardano and XRP both rose by 1%, though Dogecoin experienced the largest drop, falling 2.08% to $0.1751. Market watchers are now keenly focused on upcoming economic data, including manufacturing survey data and the Federal Reserve’s rate decision. With current expectations for no change in interest rates holding firm at a 97% probability, the spike in oil prices is complicating hopes for a policy pivot, especially given ongoing political pressure for a rate cut. The surging energy costs are rapidly diminishing the likelihood of such a policy shift.