(Bloomberg) — Escalating conflicts in the Middle East and expanding pressure on oil transport and infrastructure have global investors bracing for more turmoil when trading resumes on Sunday.
As the morning dawned in Asia, the dollar – a beneficiary of the crisis so far due to its haven position – was strong against major peers in Sydney. Stock futures and bond markets open at 6 p.m. New York time.
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With the conflict now in its second week, energy disruptions remained a major concern as the United Arab Emirates and Kuwait, along with Iraq, cut oil production as stocks filled and tankers continued to avoid the Strait of Hormuz. Brent crude rose nearly 30% last week – its biggest jump in six years – leaving it above $90 a barrel.
“Markets held up better than you might expect through the initial shock, but damage to oil infrastructure changes the equation,” said Dave Mazza, chief executive officer of Round Hill Financial. “It’s no longer just about Hormuz being effectively shut down, this supply disruption is spreading deeper into the region, and that’s the kind of change that could push already nervous investors to take more risk off the table.”
On Sunday night, Iran attacked its Middle Eastern neighbors, extending the conflict into a ninth day, while Israel attacked oil depots in Tehran and threatened the Islamic Republic’s power grid. President Donald Trump has warned that the US will consider targeting areas that have not previously been targeted. The attacks will continue “until they give up or more likely collapse completely!” He said in a social media post.
Selling extended across regions and asset classes last week as the geopolitical flip added fresh pressure to markets already under pressure from AI disruptions and worries about potential cracks in credit markets. U.S. bonds fell the most through last year’s “Independence Day” tariffs, and the S&P 500 suffered its biggest weekly loss since October. Emerging market equities fell further, posting their biggest decline since 2020.
With inflation remaining above the Fed’s 2% target, bond traders had cut expectations of a cut before the start of the war this year, while betting on deeper easing in 2027 if a slowdown were to materialize. The conflict has prompted some traders to bet on no cuts at all in 2026, although an unexpected US jobs report on Friday led to a near-consensus expectation of a two-quarter-point cut this year.
