Oil Prices Surge Past $110 as Iran War Triggers Global Market Panic

Markets Reel as Conflict Escalates

Global financial markets experienced a dramatic selloff Monday as oil prices spiked to nearly $120 a barrel following escalating conflict between Iran and a U.S.-Israel coalition . The energy crisis sent shockwaves through stock exchanges worldwide, with Japan's Nikkei 225 plunging more than 7% early in the day before recovering to close 5.2% lower and South Korea's Kospi sinking 6% .

European markets weren't spared from the carnage. Germany's DAX dropped 2.6% and Britain's FTSE 100 lost 1.9% , while U.S. futures signaled another difficult day ahead for American investors. The panic selling reflected deep concerns about energy supply disruptions from the Middle East, a region that remains crucial to global oil production.

Iran has launched missiles and drones at Gulf state neighbors and Israel, targeting critical infrastructure such as power plants, hotels, airports and data centers . The attacks have raised fears about the strategic Strait of Hormuz, a narrow waterway off Iran's coast that a fifth of the world's oil sails through on a typical day .

Oil Prices Swing Wildly

U.S. crude oil futures rose more than 25%, to nearly $115 per barrel, while Brent, the international benchmark, jumped more than 20%, to $110 per barrel . The dramatic surge came despite a record 35% rise last week , highlighting just how quickly the geopolitical crisis has unfolded.

However, oil prices proved volatile throughout the day. Oil prices whipped from nearly US$120 per barrel back toward US$90, with Brent crude settling at US$98.96 and U.S. benchmark crude closing at US$94.77 . The reversal came after President Trump suggested the conflict might be nearing an end, telling CBS News "the war is very complete, pretty much" .

U.S. retail gas prices also soared to a national average of more than $3.45 per gallon , adding immediate pressure to household budgets already strained by inflation. The energy shock threatens to revive inflationary pressures just as many economies were beginning to stabilize.

Economic Implications Spread

The oil price surge creates a particularly challenging scenario for central banks and policymakers. The combination of a weak economy and high inflation is a worst-case scenario for investors because the Federal Reserve has no good tool to fix both problems at the same time . This "stagflation" risk—where growth stagnates while prices rise—represents one of the most difficult economic environments to navigate.

Surging oil and gas prices, if they persist, could ripple across the globe, further complicating matters for countries still adjusting to higher tariffs on exports to the United States under President Donald Trump . The timing couldn't be worse for many economies still recovering from previous inflationary pressures.

Senior officials of Southeast Asian countries were meeting this week in Manila, the Philippines, where they were expected to discuss ways to counter the shock from higher energy costs . The coordinated response underscores how quickly the crisis has become a global concern requiring multilateral action.

Outlook Remains Uncertain

Energy analysts warn that volatility could persist for months. "Oil prices will reach a peak at some point –- maybe they already have, maybe there's more to come -– but they are likely to fluctuate at elevated levels for weeks, perhaps months," with "high energy prices will revive inflation globally and weigh notably on growth" according to Ipek Ozkardeskaya of Swissquote.

The conflict has already introduced new leadership uncertainty, with Iran's Assembly of Experts selecting Mojtaba Khamenei as the third leader of the Islamic Republic . This transition adds another layer of unpredictability to an already volatile situation.

While markets showed some recovery after Trump's optimistic comments, the underlying tensions remain unresolved. Energy prices will likely continue to swing on every development, keeping global markets on edge and households bracing for higher costs at the pump. The coming weeks will test whether diplomatic efforts can contain the crisis before it inflicts lasting damage on the global economy.