Global financial markets came under heavy pressure on Monday as oil prices surged to their highest levels since 2022, triggering a broad sell-off in equities across Asia and raising fears of a fresh inflation shock to the global economy. Asian stock markets plunged after crude prices spiked sharply amid growing concerns about supply disruptions from the Middle East, where the United States-Israel war with Iran entered its second week with no signs of easing.
Brent crude and US benchmark West Texas Intermediate both jumped above $114 per barrel in early trading, marking gains of more than 20% from Friday’s close. At one point, WTI surged as much as 30% to nearly $119 a barrel, while Brent climbed close to $118.
Oil surges as supply disruptions intensify
The spike in oil prices came after attacks on energy infrastructure and escalating tensions across the region threatened production and shipping routes. Tanker traffic through the Strait of Hormuz — a critical passage that typically carries about a fifth of the world’s oil and gas — has largely halted since the conflict began on February 28.
Major producers including Iraq, Kuwait and the United Arab Emirates have begun cutting oil output as storage tanks fill due to the inability to export crude, further tightening supply. Iran, Israel and the United States have also struck oil and gas facilities since the war began, exacerbating supply concerns.
Analysts warned that the disruption is no longer just a geopolitical shock but a direct constraint on energy flows.
Stephen Innes of SPI Asset Management said the impact was spreading across the entire energy supply chain. “The market is not dealing with a headline shock. It is dealing with a physical disruption of oil molecules,” he said, warning that crude prices above $100 effectively act as a tax on the global economy.
Asian equities plunge amid inflation fears
The surge in oil prices has intensified fears that inflation could rise again globally, complicating efforts by central banks to cut interest rates and support slowing economic growth.
Equity markets across Asia reacted sharply. Japan’s Nikkei 225 dropped more than 7% in early trading, while South Korea’s Kospi plunged over 8%. Taiwan’s market fell more than 5%, and shares in Australia and New Zealand slid more than 3%.
Hong Kong’s Hang Seng declined about 3%, while China’s Shanghai Composite fell around 1.5%. The broader Asia benchmark index slid as much as 5.4%, marking its steepest fall since April.
The sell-off was also expected to spread to Western markets. Futures for the S&P 500, Dow Jones Industrial Average and Nasdaq were all down more than 2%, while European stock futures fell nearly 3%.
Investors shifted toward safer assets, pushing the US dollar higher against major currencies. The dollar rose to about 158.6 yen, while the euro slipped to around $1.15.
Conflict escalation rattles energy markets
The market turmoil comes as the Middle East conflict increasingly threatens oil infrastructure and energy shipments across the Persian Gulf. Roughly 15 million barrels of crude are usually shipped daily through the Strait of Hormuz, according to energy research firm Rystad Energy.
Further escalation over the weekend added to investor anxiety. Bahrain accused Iran of striking a desalination plant crucial to drinking water supplies, while Israeli strikes targeted oil depots in Tehran.
US President Donald Trump acknowledged the surge in oil prices but said it was temporary and necessary to counter Iran’s nuclear programme.
“Short-term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and world safety and peace,” he wrote on social media.
However, market strategists warned that the financial fallout could persist if the conflict drags on.
Michael O’Rourke, chief market strategist at JonesTrading, said investor sentiment was likely to remain cautious. “The worst is yet to come in the stock market reaction,” he said, adding that markets may stay in a risk-off mode until there is clear positive news.
India bracing for market pressure
The oil surge is also weighing on emerging markets, including India. GIFT Nifty futures pointed to a nearly 3% drop at the open for the Nifty 50, as higher crude prices threaten to widen India’s import bill, weaken the rupee and stoke inflation in the world’s third-largest oil importer.
Analysts say if crude prices remain above $100 for an extended period, it could significantly slow global growth and even raise the risk of a recession.
