Oil shock deepens as markets brace for more fallout from Iran war
A fresh wave of anxiety hit global markets Monday as the economic fallout from the war in Iran kept rippling outward, with oil prices surging, major economies scrambling to respond and central bankers signaling they are watching closely for inflation pressure. Finance leaders from the Group of Seven said they were prepared to take “all necessary measures” to stabilize energy markets, while the International Monetary Fund warned the conflict is dimming the outlook for countries that had only recently started to recover from earlier shocks.
The pressure point remains energy. Reuters reported that oil prices were on track for a record monthly rise Monday as the war continued to disrupt global supply lines. The IMF said Iran’s closure of the Strait of Hormuz, combined with damage to regional infrastructure, has caused what the International Energy Agency described as the largest disruption in the history of the global oil market. According to Reuters, roughly 25% to 30% of global oil and about 20% of liquefied natural gas normally pass through that narrow waterway.
That strain is already showing up in government responses far from the Middle East. In South Korea, officials said they are considering broader driving curbs if crude prices climb further, a sign of how seriously oil-importing countries are taking the threat of prolonged disruption. Reuters said South Korean officials are weighing stronger demand-management steps if oil moves into the $120 to $130 a barrel range.
In the United States, the market reaction was jittery rather than straightforward. The Associated Press reported that U.S. stocks swung through another uneven session Monday as oil kept climbing and investors tried to gauge whether the conflict could widen further. Benchmark U.S. crude settled at $102.88 a barrel, while the S&P 500 remained under pressure after its worst week since the war began. Investors are increasingly focused on whether oil and gas can resume normal flows from the Persian Gulf before higher energy costs feed more aggressively into the broader economy.
Federal Reserve Chair Jerome Powell said Monday that the central bank can afford to wait before reacting, even as gasoline prices rise and the inflation picture becomes harder to read. Speaking at Harvard, Powell said policymakers are in a position to “wait and see” how the war affects inflation and growth, while acknowledging the tension between keeping rates low enough to support employment and high enough to prevent inflation from gaining momentum. Reuters reported that the Fed’s benchmark rate remains in the 3.50% to 3.75% range and that rate-hike bets have largely faded for now.
The broader concern is that this is no longer just an oil-market story. The IMF warned Monday that the war is creating a global but uneven shock, with poorer countries especially vulnerable to rising food and fertilizer costs on top of higher energy bills. Its economists summed up the risk bluntly: longer conflict points toward higher prices and slower growth.
For now, that is the thread tying Monday’s reaction together. Governments are talking about emergency coordination, central banks are trying not to overreact too soon, and investors are watching every signal for clues about whether the energy shock will ease or dig in deeper. With the war now in its fifth week and crude still elevated, markets appear to be treating this less like a short-lived scare and more like a crisis that could keep reshaping prices well beyond the Middle East.
