Oil prices, specifically West Texas Intermediate, climbed by 2.9% to over $72 a barrel, extending gains from the previous day. This surge was primarily driven by renewed U.S. military strikes in Iran following recent attacks on ships in the Strait of Hormuz. The U.S. also revoked a waiver that had previously allowed Iran to sell crude globally, further impacting oil supply expectations.
Global financial markets reacted to these escalating geopolitical tensions. Asian stocks were set to decline for a second consecutive day, with a selloff in chipmakers contributing to the downturn. In the U.S., S&P 500 futures dipped by 0.2%, Nasdaq 100 futures fell by 0.3%, and Dow Jones Industrial Average futures registered a loss of 85 points, or nearly 0.2%.
The conflict has heightened concerns about the Strait of Hormuz, a critical chokepoint for global oil and natural gas transit. Approximately 20 million barrels of crude oil and petroleum products, representing close to 20% of global petroleum consumption and about one-third of all seaborne oil trade, pass through this strait daily. Iran has declared the strait closed "until further notice" and threatened to target additional "enemy bases in the region" if more attacks occur, although the U.S. military and former President Trump assert it remains open.
Analysts are closely monitoring the situation as a sustained increase in energy prices could revive inflation concerns and alter expectations for global monetary policy. The 10-year Treasury yield climbed to 4.56%, suggesting investors are reassessing inflation outlooks and the possibility of the Federal Reserve maintaining elevated interest rates for longer. While stock markets have shown some resilience, further escalation could increase volatility across global financial assets. Some sectors, like defense and energy, saw gains, with Northrop Grumman up 6% and Palantir up 5.8%.
Before the war, nearly 140 vessels transited the Strait of Hormuz daily. While a multinational body overseen by the U.S. Navy reported continued, albeit reduced, traffic, the Iranian announcement of closure adds significant uncertainty. Oman, a country bordering the strait, has protested Iran's actions, demonstrating regional disapproval of the escalating conflict.
