Stocks Slump as Oil Surges Past $100, Dollar Gains: Markets Wrap
(Bloomberg) — Equities tumbled as crude oil jumped above $100 a barrel for the first time since 2022 due to escalating hostilities in the Middle East and worsening strains on oil shipping. Treasuries fell across the curve.
Asia’s benchmark share index slid as much as 5.4% — the most since April — with South Korea tumbling more than 8% and Japan about 7%. Equity-index futures for the US and Europe extended losses to more than 2.5%, indicating the selloff is set to expand to other regions. As sentiment weakened, the dollar, which has emerged as the haven of choice during this conflict, rose against almost all its major peers.
The market turmoil came as Brent crude oil jumped 18% to around $109 a barrel, adding to last week’s 28% surge as the US-Israeli war on Iran entered a second week. Major oil producers also began curbing output and traffic through the Strait of Hormuz effectively halted.
Both sides appeared to be digging in for a potentially lengthy conflict, with Iran naming a new supreme leader. President Donald Trump said 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 “safety and peace.”
Treasuries sold off once again and benchmark US 10-year yields turned higher for the year. Australia’s policy-sensitive three-year yield surged to the highest since 2011, while German bund futures slumped to almost a 15-year low.
Selling swept across regions and asset classes last week as the geopolitical flareup added fresh stress to markets that are already under pressure from AI disruptions and worries about the potential for cracks in credit markets. The escalating crisis has left investors caught between the risk of renewed inflation stemming from elevated oil prices and signs of cooling in the US labor market.
“People are going defensive” with markets now trying to grasp how long will this war last, Jun Bei Liu, co-founder and lead portfolio manager at Ten Cap Investment, said in a Bloomberg TV interview. “Investors are worried what is going to happen to the global growth should the oil remain at the current levels.”
What Bloomberg strategists say…
“There’s an uncomfortable resonance for investors with the meltdowns that occurred last April across stocks and bonds, with the added potential danger that ending a war may be harder than switching off US trade levies was. The lack of clarity about how this conflict might end is going to make it harder and harder for markets to rebound.”
— Garfield Reynolds, MLIV Asia Team Leader. Click here for the full analysis.
On Sunday, Iran pressed attacks on neighbors, while Israel struck fuel depots in Tehran and threatened the Islamic Republic’s power grid. Trump warned the US would consider targeting areas that weren’t previously aimed at. The attacks will continue “until they surrender or, more likely, completely collapse!” he said in a social media post.
The United Arab Emirates and Kuwait started reducing oil production, as the near-closure of the crucial Strait of Hormuz — a waterway crucial for the global flow of oil — rippled through energy markets and affected global supply.
The effective closure of the narrow waterway linking the Persian Gulf to the open sea has clogged up exports from the world’s top oil-producing region.
“This is no longer just about Hormuz being effectively shut, it’s about supply disruption spreading deeper into the region,” said Dave Mazza, chief executive officer at Roundhill Financial. “That is the kind of shift that can push already-nervous investors to take more risk off the table.”
That is evident in the bond market. Just as investors closed their books on a month when mounting concerns over corporate risks fueled demand for the perceived safety of Treasuries, the US-Israeli attack on Iran raised a whole new set of worries — and triggered a different response.
Instead of acting as a refuge, US government bonds took their cue from surging crude prices and yields shot up, with inflation fears taking center stage at a time when prices are already running higher than central banks would like.
Another key area of focus was the strength of the dollar. The Bloomberg Dollar Spot Index rose 0.5% on Monday.
“The dollar is the biggest beneficiary in the current environment, given the USD’s safe haven status and the US’ position as a net energy exporter,” said Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney. “How much higher the dollar will go from here depends on the depth and duration of the conflict, which remains highly uncertain.”
Meanwhile on Friday in the US, nonfarm payrolls fell 92,000 last month, one of the largest declines since the pandemic. The unemployment rate rose to 4.4%.
Spiking oil prices may precipitate a stock market correction rather than a bear market, but the latter is possible, said Ed Yardeni, president of Yardeni Research. If investors start expecting stagflation, a bear market is more likely.
“The worst is yet to come in the stock market reaction,” said Michael O’Rourke, chief market strategist at JonesTrading. “I would expect more of a risk-off mood until we get some tangible positive news.”
Here’s what investors are saying:
Homin Lee, a senior macro strategist at Lombard Odier:
“Global investors are staring at an extremely wide range of possible scenarios for the ongoing conflict, and this reality alone is enough to prompt short-term risk aversion and defensive positioning changes. Volatility will be unavoidable and also relatively higher for the broader APAC equity market given its fundamental energy insecurity.”
Jung In Yun, chief executive officer at Fibonacci Asset Management Global:
“Geopolitical uncertainty is rising. A prolonged conflict is pushing oil prices higher and fueling inflation concerns, which is weighing on global risk assets and heightening volatility across markets. There are too many things to worry at the same time.”
Vey-Sern Ling, managing director at Union Bancaire Privee:
“The Middle East conflict has rapidly evolved over the weekend from a rapid de-escalation and contained scenario into one of potentially prolonged and severe disruption on oil production and distribution. In a global risk off environment, investors tend to shift away from emerging markets into perceived safer investment regions such as the US.”
Hironori Akizawa, a fund manager at Tokio Marine Asset Management:
“I honestly have no idea how long it will last, but I think they will reach an agreement some time. I believe that the negative market sentiment will bottom out at some point this month, but the situation will not call for rushing to buy soon.”
Some of the main moves in markets:
Stocks
S&P 500 futures fell 2.2% as of 10:50 a.m. Tokyo time Nikkei 225 futures (OSE) fell 7.4% Japan’s Topix fell 5.8% Australia’s S&P/ASX 200 fell 4.3% Hong Kong’s Hang Seng fell 2.9% The Shanghai Composite fell 1.3% Euro Stoxx 50 futures fell 2.8% Currencies
The Bloomberg Dollar Spot Index rose 0.6% The euro fell 0.9% to $1.1512 The Japanese yen fell 0.5% to 158.64 per dollar The offshore yuan fell 0.4% to 6.9308 per dollar Cryptocurrencies
Bitcoin fell 1.1% to $66,453.76 Ether fell 0.3% to $1,953.3 Bonds
The yield on 10-year Treasuries advanced five basis points to 4.19% Japan’s 10-year yield advanced five basis points to 2.210% Australia’s 10-year yield advanced 14 basis points to 4.98% Commodities
West Texas Intermediate crude rose 25% to $113.47 a barrel Spot gold fell 1.8% to $5,077.29 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Abhishek Vishnoi, Ruth Carson, Cormac Mullen, Natalia Kniazhevich, Anya Andrianova and Winnie Hsu.
©2026 Bloomberg L.P.
