Oil Nears Two-Year High as Middle East Conflict Shakes Global Markets

Global financial markets declined on Friday as escalating tensions between the United States and Iran raised concerns about potential disruptions to global oil supplies, triggering volatility across stocks, bonds, and currencies.

European equities and U.S. stock futures fell sharply as investors reacted to the growing geopolitical risks. Futures tied to the S&P 500 dropped about 0.62 percent, while Nasdaq Composite futures declined 0.75 percent. In Europe, the STOXX Europe 600 index fell roughly 1 percent, reversing earlier gains as market sentiment weakened.

Energy markets were among the most affected, with crude oil prices rising to their highest levels in nearly two years amid fears that supply disruptions could occur if the conflict escalates further. Brent crude oil climbed to around $89.48 per barrel, while West Texas Intermediate crude rose more than 5 percent to about $86.22 per barrel. Analysts noted that Brent crude was on track for a weekly increase of roughly 23 percent, marking its largest surge since the market turmoil experienced during the COVID‑19 pandemic global economic crisis in 2020.

Energy market uncertainty intensified after Qatar warned that a prolonged conflict in the region could severely disrupt energy exports from Gulf producers. According to comments reported by the Financial Times, the country’s energy minister cautioned that oil prices could potentially rise toward $150 per barrel if regional supply chains were significantly affected.

Rising oil prices also reshaped expectations for global monetary policy. Traders have sharply reduced bets on interest rate cuts from the Federal Reserve, now pricing in only about 30 to 35 basis points of reductions this year, down from roughly 55 basis points anticipated a week earlier. Higher energy costs are widely expected to fuel inflation, which could limit central banks’ ability to ease policy.

Bond markets reflected these changing expectations. Yields on the U.S. 10‑year Treasury note rose to around 4.17 percent and were on track for their largest weekly increase since April 2025. Meanwhile, traders now expect the European Central Bank to maintain tighter policy conditions, with some markets even pricing in the possibility of rate hikes later in the year.

Currency markets also responded to the uncertainty, with investors moving toward safe-haven assets. The U.S. Dollar Index rose approximately 0.33 percent on Friday and was set for its strongest weekly performance since September 2024.

Global equities broadly weakened during the week as risk sentiment deteriorated. The MSCI All‑Country World Index was on track for a weekly decline of nearly 3 percent, its steepest drop in about a year.

Despite the turmoil across markets, gold prices remained relatively stable, with Gold trading near $5,086 per ounce, though the metal was still heading for a modest weekly decline.

Market analysts say volatility is likely to remain elevated in the coming weeks as investors assess the potential economic impact of prolonged geopolitical tensions and their effect on energy prices, inflation, and global growth.

Source: Reuters