Global stock markets showed a mixed reaction as US President Donald Trump formally notified Congress of renewed hostilities with Iran and ordered fresh US strikes. Dow futures fell 0.27% to 52,621.00, S&P 500 futures declined 0.15% to 7,552.00, and Nasdaq 100 futures slipped 0.02% to 29,468.50. Asian markets were also lower, with South Korea's KOSPI falling 0.99% and Japan's Nikkei 225 declining 0.70%. In contrast, London's FTSE 100 remained largely unchanged, up just 1 point at 10,498.
Oil prices surged in response to the escalating conflict. Brent crude climbed 2.11% to $85.06 per barrel, marking its highest level in a month, while WTI crude oil rose 2.21% to $79.87 per barrel. This increase was driven by concerns over potential supply disruptions in the Strait of Hormuz, a critical oil transit route where Trump pledged the US would act as its "guardian" and impose a 20% charge on all cargo shipped. The US Central Command announced that the blockade of Iranian ports would begin at 4 p.m. ET on Tuesday. This decision comes after shipping volumes in the Strait, which account for roughly one-fifth of global oil supplies before the conflict escalated in February, had not fully recovered.
Analyst reactions highlight the market's cautious stance. IG chief market analyst Chris Beauchamp noted that while oil prices rose, the reaction was calm relative to the potential for supply disruption, suggesting markets might be pricing in a resumption of negotiations. However, Tickmill market analyst Patrick Munnelly described the immediate market reaction as "ugly," pushing crude higher, equities lower, and the dollar firmer, while pushing back expectations for rate cuts. He also emphasized that uncertainty around the world's most important transit route is enough to keep a persistent risk premium in crude prices, despite Brent being below the $95 average seen earlier in the conflict.
Trump's notification to Congress, citing a July 10 letter, stated that hostilities with Iran resumed on July 7, initiating a fresh 60-day period under the War Powers Act for military operations without additional congressional approval. He accused Iran of violating a memorandum of understanding by attacking commercial vessels in the Strait of Hormuz. Iranian Foreign Minister Abbas Araghchi criticized the US proposal on X, asserting Iran has always been and will remain the "GUARDIAN" of the Strait. Meanwhile, Iran's army reportedly targeted US assets in Kuwait and a "hostile vessel" with cruise missiles, and the UAE reported attacks on its tankers in Omani waters.
