Brent rose 7.5% to $78.34 a barrel, while U.S. crude rose 7.3% to $71.88 a barrel. Gold rose 1.5 percent to $5,358 an ounce.
Military attacks on Iran by the United States and Israel show no sign of abating, while the Arab nation has responded with barrages of missiles across the region, risking drawing its neighbors into conflict.
President Donald Trump suggested to the Daily Mail that the war could continue for four more weeks, while the posts would remain in place until US targets were met.
All eyes were on the Strait of Hormuz, where a fifth of the world’s seaborne oil trade and 20% of liquefied natural gas flow. While the vital waterway has not yet been closed, maritime tracking sites have indicated that tankers on both sides of the strait are wary of attack or may not be able to get insurance for the trip.
“The most immediate and significant development affecting oil markets is the effective shutdown of traffic through the Strait of Hormuz, preventing 15 million barrels of crude oil from reaching markets,” said George Levin, head of geopolitical analysis at Rystad Energy.
“If signs of an escape don’t emerge quickly, we expect significantly higher oil prices.” A prolonged increase in oil prices would risk a resurgence of inflationary pressures globally, while also acting as a tax on businesses and consumers that could reduce demand.
OPEC+ agreed on Sunday to raise oil output by 206,000 barrels per day for April, but most of that output still needs to be exported by tanker from the Middle East.
“The closest historical analog in our view is the Middle East oil embargo of the 1970s, which saw oil prices rise 300% to around $12/bbl in 1974,” said Alan Gilder, Wood Mackenzie’s SVP of refining, chemicals and oil markets.
“That’s only US$90/bbl in terms of 2026. Concerned about significant supply losses in today’s market, this looks very achievable.”
That would be costly for Japan, which imports all its fuel, sending the Nikkei down 2.3%, with airlines the hardest hit. South Korea has lost 1.0% so far this year after the metric rose.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6%.
And it’s a big US data week
For Europe, EUROSTOXX 50 futures were down 1.9% and DAX futures were down 1.8%. On Wall Street, S&P 500 futures and Nasdaq futures both lost 1.1%.
The oil shock rippled through currency markets with the dollar the main beneficiary. The U.S. is a net exporter of energy and Treasuries are still considered a liquid asset at times of stress, the euro fell 0.4% to $1.1768.
While the Japanese yen is often a safe haven, the country imports almost all of its oil, with the flow being bilateral. The dollar added 0.3% to 156.55 yen, while the Australian dollar, which is often sold as a liquid proxy for global risk, gained sharply.
In bond markets, the 10-year Treasury yield fell 2 basis points to a three-month low of 3.926%, falling below 4% last week for the first time since late November.
The bond received a bid on Friday after UK mortgage lender MFS was placed into administration following allegations of financial irregularities. Its collapse created a widespread credit crunch among lenders with prominent big banks. MFS had borrowed 2 billion pounds ($2.69 billion).
The news sent banking stocks reeling and Wall Street hit hard, along with confusion over AI-related stocks.
Investors should also weather a series of U.S. economic data this week, including the ISM manufacturing survey, retail sales and the permanent vital wages report.
Any weakness could dampen confidence in the economy after a disappointing fourth quarter, but would likely reduce the chances of a rate cut from the Federal Reserve.
Markets currently see a 53% chance of easing in June and about 60 basis points this year.
