Increased targeting of oil and gas infrastructure in the Iran war is hitting trader sentiment hard as concerns mount that the current energy crisis is going to have a lasting impact on the global economy.
Oil prices surged again on Thursday as the conflict intensified, raising fears of prolonged disruptions in Gulf oil and gas production. Brent crude, the international benchmark, briefly exceeded $119 a barrel before easing to $110.80, marking a 3.2% increase from the previous day. U.S. crude rose 0.7% to $96.09 following renewed Iranian attacks on energy facilities in retaliation for an Israeli strike on a major Iranian gas field.
The strikes added to concerns about persistent high energy costs, fueling inflationary pressures across multiple regions. European and U.S. stock markets responded sharply. Germany’s DAX and the U.K.’s FTSE 100 both fell 2.5%, while France’s CAC 40 dropped 1.9% by mid-afternoon. In comparison, Wall Street losses were more modest, with the S&P 500 down 0.4% and on track for a fourth consecutive losing week, its longest streak in a year. The Dow Jones Industrial Average fell 188 points (0.4%) and the Nasdaq lost 0.6%.
Investors are increasingly wary of oil-driven inflation. Just a month ago, markets were pricing in multiple Federal Reserve rate cuts, but the Fed’s decision on Wednesday to hold rates, along with Chair Jerome Powell’s cautious comments on potential cuts in 2026, have shifted expectations. Market pricing now suggests roughly an 80% probability that the Fed will maintain rates for the remainder of the year, with a near 5% chance of a hike. Treasury yields rose as a result: the two-year yield hit 3.81%, its highest since last summer, while the 10-year yield held at 4.26%, up from 3.97% before the war escalated.
Economic data also contributed to higher yields. U.S. unemployment claims fell unexpectedly, and manufacturing growth in the mid-Atlantic region accelerated. Rising yields are increasing borrowing costs, affecting mortgages, loans, and a broad range of investments. Precious metals were sharply impacted, with gold falling 6.6% to $4,575.60 per ounce and silver dropping 11.9%. Mining stocks followed suit, with Newmont down 6.7% and Freeport-McMoRan losing 6.1%.
Equities in the technology and green sectors provided some relief. Micron Technology declined 4.1% despite reporting a record quarter, partially erasing its year-to-date gains. Rivian Automotive jumped 8.5% after announcing a partnership with Uber, which will invest up to $1.25 billion and purchase 10,000 autonomous robotaxis, while Uber shares rose 0.2%.
The combination of geopolitical tensions, rising energy costs, and market uncertainty underscores the fragility of global economic conditions. Traders and investors are bracing for continued volatility, as the Iran war tightens its grip on energy markets and threatens to ripple through economies worldwide.
