Oil prices surged on Monday after Israel confirmed it had carried out military strikes against targets inside Iran, reigniting concerns over the stability of the Middle East and the future of global energy supplies.
Brent crude, the international oil benchmark, climbed 4.5% to more than US$97 per barrel as traders reacted to the renewed escalation and growing doubts over prospects for a deal to reopen the Strait of Hormuz.
The strategically vital waterway, which handles roughly one-fifth of global oil and gas exports, has remained largely closed since the outbreak of the Middle East conflict more than three months ago. Any further disruption threatens to tighten energy markets and increase inflationary pressures across the global economy.
Market participants moved quickly to price in a higher geopolitical risk premium following the latest military action.
Stephen Innes, managing partner at SPI Asset Management, said: “Every exchange of fire adds another layer to the geopolitical risk premium embedded in crude. Every military response forces traders to widen the range of possible outcomes.”
The rise in oil prices added further pressure to already fragile equity markets, which have been unsettled by a sharp sell-off in technology stocks and growing concerns that valuations across the artificial intelligence sector may have become overstretched.
Asian markets suffered heavy losses, with South Korea’s technology-focused Kospi index leading the decline. The benchmark fell 8.2%, extending losses from last week’s record high and leaving it nearly 16% below its recent peak.
Japan’s Nikkei 225 dropped more than 4%, with semiconductor and technology-related stocks among the worst performers as investors continued to reduce exposure to growth sectors. Taiwan’s benchmark index also came under pressure, falling 3.5%.
The weakness comes after the Nasdaq recorded a 4.2% fall amid mounting concerns over technology valuations and the sustainability of the AI-driven market rally.
Investors will now be closely watching developments in the Middle East, as any further escalation could drive energy prices higher and increase volatility across global financial markets.
