The Group of Seven (G7) finance ministers will ‌discuss on Monday a joint release of oil from emergency reserves coordinated by the International Energy Agency, the Financial Times reported.

Three G7 countries, including ⁠the US, have so far expressed support for the idea, the FT said citing sources, and added that the ministers and the IEA Executive Director Fatih Birol will hold a call to discuss the impact of the Iran ‌war.

The ⁠report comes as oil prices surged more than 25% on Monday to their highest levels since mid-2022 as some major producers cut ⁠supplies and fears of prolonged shipping disruptions gripped the market due to the expanding US-Israeli ⁠war with Iran.

The IEA and the G7 presidency did not respond to ⁠requests for comment outside regular business hours.

Governments scrambled to limit the impact on economies and consumers from the widening Iran war, which fuelled a record surge in oil prices on Monday after key producers cut output and Tehran signalled that hardliners would remain in charge.

In a sign of mounting governmental concern over supply disruptions, the Group of Seven finance ministers will discuss the possibility of a joint release of emergency oil reserves in a meeting on Monday, a French government source said.

In South Korea, which buys 70% of its oil from the Middle East, President Lee Jae Myung said Seoul would cap fuel prices for the first time in nearly 30 years and he warned against panic buying.

Speaking at an emergency meeting, Lee called the crisis "a significant burden on our economy, which is highly dependent on global trade and energy imports from the Middle East."

A senior Japanese member of Parliament on Sunday said the government had instructed a national oil reserve storage site to prepare for a possible crude release, although the country's chief cabinet secretary later said no decision had been made to release stockpiles.

Japan imports around 95% of its oil from the Middle East. It has reserves to cover 354 days of consumption.

Elsewhere, Vietnam removed import tariffs on fuels and Bangladesh shut universities to conserve electricity and fuel, while China last week asked refiners to halt fuel exports and try to cancel shipments that were already committed.

Trump downplays US price surge

President Donald Trump tried to downplay concerns about rising US gasoline prices, which were up 11% for the week on Friday, while Senate Minority Leader Chuck Schumer called on him to sell oil from the Strategic Petroleum Reserve.

"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 USA, and World, Safety and Peace," Trump posted on Truth Social on Sunday night. "ONLY FOOLS WOULD THINK DIFFERENTLY!"

Oil jumped 25%, with Brent on track for a record one-day gain, while OPEC producers Kuwait and Iraq cut output over the weekend as the crucial Strait of Hormuz remained effectively shut.

Brent jumps 25% on supply fears

Across Asia, which sources 60% of its oil from the Middle East, equities slid and the dollar rose as worries grew that the disruption in energy supplies could be prolonged.

Iran on Monday named Mojtaba Khamenei to succeed his father Ali Khamenei as supreme leader, a move that is expected to draw Trump's ire. Weekend attacks on Iranian oil storage facilities fuelled fears of retaliatory strikes on energy facilities.

In Bahrain, Bapco Energies declared force majeure on Monday following an attack on its refinery complex, the company said.

"Oil prices have now gathered all the ingredients for a perfect storm - Middle East Gulf producers cutting output, the prolonged closure of the Strait of Hormuz ... all compounded by a growing pessimism about a quick turnaround in the current situation," said Kpler senior oil analyst Muyu Xu.

Iraq cut oil production at its main southern oilfields by 70% to 1.3 million barrels per day, three industry sources said on Sunday, while Kuwait Petroleum Corp began cutting oil output on Saturday and declared force majeure.

No. 2 LNG exporter Qatar has already halted exports of the superchilled fuel and analysts predict that the United Arab Emirates and Saudi Arabia will also have to cut output soon as they run out of oil storage due to the Strait of Hormuz closure.

The escalating crisis in the Middle East has dramatically changed the outlook for Asian central banks, with the huge supply shock posing a difficult trade-off ​between underpinning growth and countering inflation.

For emerging Asian central banks, cutting interest rates has become a risky bet not just because of the added price pressure from higher ‌fuel costs, but the risk of triggering capital outflows through worsening terms of trade with the US.

The Reserve Bank of India, for one, expects to focus more on supporting growth by keeping interest rates low, sources have told Reuters. But a rush towards the safe-haven dollar, which is intensifying from the US-Iran war, may force it to ramp up intervention to prop up its weakening currency.

"We don't see a possibility of a near-term rate hike in India - we do not ​see retail fuel prices moving higher immediately," said Suvodeep Rakshit, economist at Mumbai-based Kotak Institutional Equities.

"At this stage, the immediate priority of the central bank will be what happens on FX. ​We expect them to continue intervening to curb volatility there. An afterthought will be the liquidity impact of that intervention and they will infuse liquidity ⁠as needed."

Thailand and the Philippines may be forced to reverse their dovish monetary policy stance, even as rising fuel costs hurt their economies, said Toru Nishihama, chief emerging market economist at Dai-ichi Life ​Research Institute in Tokyo.Market Research Reports

"Many central banks will face a tough decision as they come under pressure from both markets and governments," Nishihama said. "With no clear end in sight to the conflict, the risk of stagflation ​is heightening day by day."

Share markets plunged and the safe-haven US dollar rose in Asia on Monday as oil surged past $110 a barrel, stoking fears of a protracted Middle East war on global energy supplies and higher inflation that may force central banks to hike rates.

The trade-off is particularly acute for manufacturing-heavy economies like South Korea and Japan, which are dependent on global trade, stable markets and cheap raw material costs - all being undermined by the widening Middle ​East crisis.

South Korea's central bank, which kept rates steady in February, could take a more hawkish stance if inflation persistently stays a percentage point above its target, said Citigroup economist Kim Jin-wook.

"For now, ​we continue to believe BoK is unlikely to hike policy rate in response to a higher-than-expected oil price," with government steps to curb fuel prices limiting the pass through of oil moves on inflation, Kim said.

'THINK OF THE ‌UNTHINKABLE'

Developed market ⁠central banks, such as the Federal Reserve, also face a tricky act balancing growth, inflation and increasing political pressure.

The dilemma runs deep for the Bank of Japan. If crude oil prices stay at $110 for a year, that could knock 0.39 of a percentage point off growth, according to Nomura Research Institute, a huge blow to an economy with subdued potential growth of around 0.5 per cent to 1 per cent.Global Economy Insights

But unlike in the past when it could afford to pause rate hikes, the BOJ has less room now to look through price pressures with inflation having exceeded its 2 per cent target for nearly four years.

That means the BOJ will have little ​choice but to repeat its mantra of continued ​rate hikes, while staying mum on the timing ⁠of such a move that could draw the ire of an administration hostile to higher borrowing costs, analysts say.

Australia and New Zealand are typical of how economies in different cycles put policymakers in a difficult bind.

Sustained oil price hikes risk de-anchoring price expectations in Australia, where inflation is already elevated, said ​Jonathan Kearns, chief economist at Challenger who is also a former Reserve Bank of Australia official.

"If inflation expectations increase, which they obviously could in ​this period where we've had ⁠high inflation, that will mean that the Reserve Bank would need to have interest rates higher for longer in order to bring inflation back down."

New Zealand faces a different challenge as the economy has struggled to recover from the hit from past rate hikes.

"We suspect central banks, and the RBNZ in particular, may well have to tolerate higher inflation in the short run to avoid tightening into a slowing global economy," said Jarrod ⁠Kerr, chief ​economist at Kiwibank.

International Monetary Fund Managing Director Kristalina Georgieva said on Monday a 10 per cent rise in oil prices, if persistent through ​most of the year, would result in a 40-basis-point increase in global inflation.

"We are seeing resilience tested again by the new conflict in the Middle East," Georgieva said in a symposium in Tokyo. "My advice to policymakers in this new global environment is ​think of the unthinkable and prepare for it."

Oil prices surged over $119 a barrel, hitting ‌levels not seen since mid-2022, on Monday as some major producers cut supplies and fears of prolonged shipping disruptions gripped the market due to the expanding U.S.-Israeli war with Iran.
Brent crude futures were up $13.02, or 14%, at $105.71 per barrel at 0917 GMT, while U.S. West Texas Intermediate (WTI) crude futures were ​up $12.16, or 13%, at $103.06.
In a whiplash session, Brent had earlier hit a high of $119.50 a barrel, indicating the biggest-ever ​absolute price jump in a single day, and WTI reached $119.48 a barrel. Before the surge on Monday, ⁠Brent had already climbed 28% and WTI 36% over last week.
The Strait of Hormuz, through which roughly one-fifth of the ​world's oil and liquefied natural gas typically passes, is virtually shut. Also boosting prices is the appointment of Mojtaba Khamenei to succeed his ​father Ali Khamenei as Iran's supreme leader, signalling that hardliners remain firmly in charge in Tehran a week into its conflict with the United States and Israel.
The war could leave consumers and businesses worldwide facing weeks or months of higher fuel prices even if the conflict, which started on ​February. 28, ends quickly, as suppliers grapple with damaged facilities, disrupted logistics and elevated risks to shipping.
U.S. gasoline contracts surged to ​their highest since 2022 at around $3.22 a gallon, at a time when U.S. President Donald Trump has told U.S. consumers the impact on ‌their cost ⁠of living would be limited ahead of mid-term elections in November.
Governments can release strategic petroleum reserves to counteract supply disruptions. U.S. Senate Democratic Leader Chuck Schumer called on Trump to make such a move and a French government source said on Monday that the Group of Seven nations would discuss this also.

The price of the US benchmark WTI oil contract topping $100 after the United States launched a military attack against major crude producer Iran is the latest significant swing experienced by the commodity this century.

AFP examines the volatile movements, including when crude surged to record highs close to $150 per barrel in 2008, before turning negative 12 years later during the Covid-19 pandemic.

2022: Russia's invasion of Ukraine

Crude futures last climbed above $100 in February 2022, soon after the invasion of Ukraine by oil and gas producer Russia.

In March of that year, prices approached their 2008 highs, with Brent reaching $139.13 and the main US contract, West Texas Intermediate (WTI), $130.50.

Fears of insufficient oil supplies as Western sanctions against Russia followed -- coupled with increased demand after the Covid-19 pandemic -- kept prices mostly above $100 until the summer of 2022.

Prices went on to fall back largely owing to high supplies.

2020: Covid pandemic

Just two years before surpassing $100 following Russia's invasion, oil prices briefly turned negative following the onset of the coronavirus pandemic that shut offices and factories -- and grounded planes worldwide.

The market also tumbled on scarce storage facilities and a Saudi-Russia price war.

WTI slumped to minus $40.32, meaning that producers paid buyers to take the oil off their hands.

At the same time, Brent tanked to a record low of $15.98.

2012: Iran crude embargo

After falling under $90 over a eurozone economic crisis, oil prices rose back above $100 after Western powers imposed a raft of economic sanctions on Iran, including crude exports, aimed at halting its nuclear programme, long a source of Washington-Tehran tension.

Wider tensions in the Middle East owing to the Syria conflict kept prices almost continuously above $100 until 2014, before sliding under $50 at the start of the following year as a result of American shale oil flooding the market.

2011: Arab Spring

Brent soared to $127 in March 2011 following unrest in the oil-producing Middle East and North Africa region.

The market bounded higher after the so-called Arab Spring uprisings toppled the long-standing leaders of Tunisia, Egypt and Yemen, while unrest also rocked other parts of the region, especially crude producer Libya.

2008: Record-high $147

On July 11, 2008, Brent hit a record high of $147.50 per barrel, having breached $100 at the start of the year for the first time.

The same day, WTI achieved an all-time peak at $147.27 per barrel.

Crude surged thanks to falling stockpiles in the United States, strong Chinese demand and unrest in key OPEC members Iran and Nigeria.

A weaker dollar also lent strong support, making crude priced in the greenback cheaper for buyers holding other currencies.

But by December 2008, Brent had tanked to sit at around $36 owing to a severe economic recession worldwide in the wake of the global financial crisis.

Oil prices surged about 20% on Monday (9 March), hitting their highest since July 2022, as the expanding US-Israeli war with Iran ‌led some major Middle Eastern oil producers to cut supplies and on fears of prolonged disruption to shipping through the Strait of Hormuz chokepoint.

Iraq and Kuwait have begun cutting oil output, adding to earlier liquefied natural gas reductions from Qatar, as the war blocked shipments from the Middle East.

Analysts predict the United Arab Emirates and Saudi Arabia will have to also cut output ​soon as they run out of oil storage.

The war could leave consumers and businesses worldwide facing weeks or months of higher fuel prices even ​if the week-old conflict ends quickly, as suppliers grapple with damaged facilities, disrupted logistics and elevated risks to shipping.

Brent crude futures ⁠rose as much as $18.35, or 19.8%, to $111.04 a barrel and were up $15.24, or 16.4%, at $107.93 as of 0014 GMT on Monday.

US West Texas Intermediate (WTI) crude futures were ​up $16.50, or 18.2%, at $107.40 a barrel, after rising as much as $20.34, or 22.4%, to $111.24 earlier in the session.

Brent climbed 27% and WTI rose 35.6% last week, before ​the latest jumps.

"I think prices have rallied this morning on the reports that Middle East producers are now reducing output due to storage facilities filling up fast," said Daniel Hynes, senior commodity strategist at ANZ.

"The next flag will be whether it eventually gets to a point where they have to start shutting in oil wells, which not only impacts output even further, it ​delays a response once the conflict eases as well. That would potentially sustain those prices for much longer," Hynes added.

Iraqi oil production from its main southern oilfields ​has fallen by 70% to just 1.3 million barrels per day as the country is unable to export oil via the Strait of Hormuz due to the Iran war, three industry ‌sources said ⁠on Sunday. Crude storage has reached maximum capacity, said an official with the state-run Basra Oil Company.

Kuwait Petroleum Corporation began cutting oil output on Saturday and declared force majeure on shipments, though it did not say how much production it would shut.

Iran's attacks on oil infrastructure across the region have continued. Fujairah Media Office said fire broke out in the UAE's Fujairah oil industry zone resulting from debris falling, with no injuries reported. Saudi Arabia's Defence Ministry said on X it intercepted a drone heading to ​the Shaybah oilfield.

New leader

Iran on Monday named Mojtaba ​Khamenei to succeed his father Ali ⁠Khamenei as Supreme Leader, signalling that hardliners remain firmly in charge in Tehran a week into its conflict with the United States and Israel.

"With the appointment of the late leader's son as Iran's new leader, US President Donald Trump's goal of ​regime change in Iran has become more difficult," said Satoru Yoshida, a commodity analyst with Rakuten Securities.

"That view accelerated buying, ​as Iran is expected ⁠to continue its closure of the Strait of Hormuz and attacks on other oil-producing nations' facilities, as seen last week," he said, predicting WTI could rise to $120 and then $130 a barrel in a relatively short period.

Israel's military has threatened to kill any replacement for Khamenei, while Trump said the war might only end once Iran's military and rulers had ⁠been wiped ​out.

Meanwhile, as oil prices surged, US Senate Democratic Leader Chuck Schumer called on Trump to release ​oil from the Strategic Petroleum Reserve.

"President Trump should release oil from the SPR now to stabilise markets, bring prices down, and stop the price shock that American families are already feeling thanks to his ​reckless war," Schumer said in a statement.

The US dollar held broadly steady in Asian trade ​on Friday and was poised for its steepest weekly gain in more than a year as the escalating conflict in the Middle East drove demand for safe-haven ‌assets.

The euro and yen remained on the back foot as the crisis drove oil prices ever higher, spurring inflation risks in economies dependent on energy imports and upending policy expectations for the Federal Reserve and other central banks.

Earlier hopes for a de-escalation gave way to fresh uncertainty, with Iran warning that Washington would “bitterly regret” the sinking of an Iranian warship. US President Donald Trump said he wanted to be involved in choosing ​Iran’s next head of state after US and Israeli air strikes killed Supreme Leader Ali Khamenei in the early moments of the war.

“If the Middle Eastern conflict ​continues at its current intensity, it’s likely to bring sustained higher inflation, a stronger US dollar, and a vastly reduced chance of Fed ⁠rate cuts,” IG market analyst Tony Sycamore wrote in a note.

The dollar index , which measures the greenback against a basket of currencies, was trading a touch lower at 99.03, still on ​course for a 1.4 percent gain this week that would be the most since November 2024.

The euro was little changed at $1.161 and set for a 1.7 percent slide this week. The yen fell ​0.2 percent to 157.83 per dollar. Sterling nudged up 0.02 percent to $1.3358.

The war intensified on Thursday, with US and Israeli jets hitting areas across Iran, and Gulf cities coming under renewed bombardment.

In a phone interview with Reuters, Trump said Mojtaba Khamenei, a son of the late supreme leader who has been considered a favorite to succeed his father, was an unlikely choice.

The greenback was one of a handful of winners in a volatile ​few sessions that have dragged stocks, bonds and, at times, even safe-haven precious metals lower.

“Broadly speaking, we are seeing most clients reduce risk across both G10 and EM currencies,” said ​Nathan Swami, head of FX trading for Japan, Asia North, Asia South and Australia at Citi in Singapore.

“When the conflict started over the weekend, we saw hedgers and custodians buy dollars in many of the onshore ‌markets. Central bank ⁠support has kept Asian FX markets in check for now, but we think more depreciation pressure will build up the longer the conflict lasts.”

Bank of Japan Deputy Governor Ryozo Himino said in parliament that the weak yen was pushing up import costs and may affect underlying inflation.

If the Middle East conflict and closure of the Strait of Hormuz last only about a month, the impact on growth in developing Asia would be modest, said Albert Park, chief economist for the Asian Development Bank.

The spike in energy prices from the Middle East war has stoked fears of ​a resurgence in inflation, with overnight index swaps (OIS) ​showing shifts in rate outlooks for major ⁠central banks.

US retail gasoline and diesel prices are soaring as the U.S.-Israel war with Iran constrains oil and fuel exports, which could be a political test for President Donald Trump's Republican Party ahead ​of midterm elections in November.

Fuel prices jumped more than 10 percent this week as oil rose above $90 a barrel, its highest in years, adding pain at the ‌pump for consumers already strained by inflation. Trump on Thursday shrugged off higher gasoline prices in an interview with Reuters, opens new tab, saying "if they rise, they rise."

The president had vowed to lower energy prices and unleash U.S. oil and gas drilling during his second term, but much of his tenure has been marked by volatility and uncertainty amid shifts in policies like tariffs and geopolitical turmoil. The US is the world's largest oil producer. It is a major exporter ​but also imports millions of barrels a day since it is the world's largest oil consumer.

As of Friday, the national average prices for regular gasoline stood at $3.32 a ​gallon, up 11 percent from a week ago and the highest since September 2024, according to data from the motorists association AAA. Diesel was at $4.33, ⁠up 15 percent from a week ago, surging to the highest since November 2023.

US motorists in parts of the Midwest and the South, including states that supported Trump, have ​seen some of the steepest increases in fuel costs since the conflict in Iran started.

In Georgia, a swing state, average retail gasoline prices rose 40.1 cents a gallon over the past week, ​according to fuel tracking site GasBuddy.

Andrenna McDaniel, a healthcare insurance worker in South Fulton, Georgia, said she was surprised to see prices skyrocket overnight.

“They jumped up so quickly," she said on Friday, adding that she does not agree with the war at all.

McDaniel, a Democrat, said that for now she is only driving for the most important things, and feels lucky that she works from home so she does not have to drive as ​much as other people do.

Georgia voted for Donald Trump in the 2024 election.

Trump voter Richard Soule, 69, a US Air Force veteran and a retired firefighter, said a little pain at the pump ​is worth Trump's efforts to protect America.

Gasoline prices are displayed at a gas station price display, in Carlsbad, California

Gasoline prices are displayed at a gas station price display, in Carlsbad, California, US, March 3, 2026. REUTERS/Mike Blake/File Photo Purchase Licensing Rights, opens new tab

"When President Trump went in there and bombed out their nuclear, and they just thumbed their nose at it, I believe he did the right thing at the right ‌time," Soule said ⁠on Friday as he filled up his Ford F-150 truck in Marietta, Georgia.

Other states, including Indiana and West Virginia have seen prices rise by 44.3 cents and 43.9 cents, respectively.

PRICES MAY RISE FURTHER

More pain may be on the way, analysts said, as oil prices continue to trend upward. On Friday, US oil futures settled at $90.90 a barrel, up nearly $10 and the biggest single-day rise since April 2020.

“Given current market conditions, the national average price of gasoline could climb toward $3.50 to $3.70 per gallon in the coming days if oil continues rising and supply disruptions persist,” GasBuddy analyst Patrick De ​Haan said.

The disruptions in the Middle East and ​the Strait of Hormuz, a key trade ⁠conduit, have boosted demand for US oil abroad, which in turn has driven up prices for domestic refiners too.

“The US has weaned itself off of its dependence on Middle Eastern crude, but obviously Asian refineries, and to a lesser extent, European refineries have not,” Denton Cinquegrana, chief oil ​analyst with OPIS.

“That’s what you’re seeing happen in the spot market, because the demand for US exports rise, and so the price rise."

Seasonal ​factors could add further ⁠pressure. Gasoline prices typically go up in the spring and peak in the summer due to higher gasoline demand and production of summer-blend gasoline, which is more costly to produce.

Diesel fuel saw an even more aggressive jump since Iran began retaliating against US and Israeli strikes, significantly disrupting shipping in the Strait of Hormuz.

Global diesel inventories have remained in tight supply due to heavy demand for heating and power generation ⁠during a ​prolonged winter in the US and other parts of the world and a structural tightness of refining capacity.

Sticker prices ​of everything from food to furniture go up when the cost of diesel goes up, as the fuel is mainly used in freight transportation, manufacturing, agriculture, and global shipping, analysts said.

“In a world where buzzword seems to be 'affordability', that is ​certainly not going to help," Cinquegrana said.

The US-Israeli war with Iran could leave consumers and businesses worldwide facing weeks or months of higher fuel prices even if the week-old conflict ends quickly, as suppliers grapple with damaged facilities, disrupted logistics, and elevated risks to shipping.

The outlook poses a global economic threat and a political vulnerability for US President Donald Trump leading into the midterm elections, with voters sensitive to energy bills and unfavorable to foreign entanglements.

"The market is shifting from pricing pure geopolitical risk to grappling with tangible operational disruption, as refinery shutdowns and export constraints begin to impair crude processing and regional supply flows," JP Morgan analysts said in a research note on Friday.

The conflict has already led to the suspension of around a fifth of global crude and natural gas supply, as Tehran targets ships in the vital Strait of Hormuz between its shores and Oman, and attacks energy infrastructure across the region.

Global oil prices have surged more than 25% since the start of the war, driving up fuel prices for consumers worldwide.

A nearly complete shutdown of the Strait means the region's giant oil producers - Saudi Arabia, the United Arab Emirates, Iraq and Kuwait - have had to suspend shipments of as much as 140 million barrels of oil - equal to about 1.4 days of global demand - to global refiners.

As a result, oil and gas storage at facilities in the Middle East Gulf are rapidly filling, forcing oil fields in Iraq and Kuwait to cut oil production, with the United Arab Emirates likely to cut next, analysts, traders and sources said.

"At some point soon, everyone will also shut in if vessels do not come," said a ⁠source with a state oil company in the region, who asked not to be named.

Oilfields forced to shut in across the Middle East as a result of the shipping disruptions could take a while to return to normal, said Amir Zaman, head of the Americas commercial team at Rystad Energy.

"The conflict could be ended, but it could take days or weeks or months, depending on the types of fields, age of the field, the type of shut-in that they've had to do before you can get production back up to what it once was," he said.

Iranian forces, meanwhile, are targeting regional energy infrastructure - including refineries and terminals - forcing them to shut down too, with some of those operations badly damaged by attacks and in need of repairs.

Qatar declared force majeure on its huge volumes of gas exports on Wednesday after Iranian drone attacks and it may take at least a month to return to normal production ‌levels, sources told Reuters. Qatar supplies 20% of global LNG.

Saudi Aramco’s mammoth Ras Tanura refinery and crude export terminal, meanwhile, has also closed due to attacks, with no details on damage.

The White House has justified the attack on Iran, saying the country posed an imminent threat to the United States, although it has not provided details. Trump has also said he was concerned about Iran's efforts to obtain a nuclear weapon.

DANGER IN THE STRAIT

A quick end to the war would soothe markets. But a return to pre-war supply and pricing could take weeks or months, depending on the extent of the damage to infrastructure and shipping.

"Considering physical damage due to Iranian strikes, so far we have not seen anything that would be considered structural, although the risk remains as long as the war continues," said Joel Hancock, energy analyst, Natixis CIB.

The biggest question for energy supplies is how and when the Strait of Hormuz will become safe for shipping again. Trump has offered naval escorts to oil tankers and promised US insurance support to vessels in the region.

But safety in the waterway may be elusive, as Iran has the capacity to sustain drone attacks on shipping for months, intelligence and military sources have said.

The conflict could also encourage countries to top up their strategic petroleum reserves in the weeks and months after the conflict ends, by exposing the dangers of thin inventories. That would increase demand for oil and support prices.

GLOBAL ECONOMIC, POLITICAL RISK

In the meantime, the disruption in energy shipments is reverberating through supply chains and economies in import-reliant Asia, which sources 60% of its crude oil from the Middle East.

In India, state-run Mangalore Refinery and Petrochemicals MRPL.NS declared force majeure on gasoline export cargoes, sources said this week, joining a growing number of refineries in the region unable to fulfill sales contracts due to lack of supply.

At least two refineries in China have cut runs. China, a big supplier to the region, has asked refineries to suspend fuel exports. Thailand has also suspended fuel exports, while Vietnam has suspended crude shipments.

Disruption has given Russia a boost. Prices for Russian crude cargoes have risen as the US has given Indian refiners a 30-day waiver to buy Russian crude to substitute for lost Middle East supply. Washington had pressured India to cut Russian oil imports under the threat of tariffs.

In Japan, the No. 2 global LNG importer, baseload power futures for Tokyo for the fiscal year starting in April jumped more than a third this week on the EEX in anticipation of higher fuel prices. And in Seoul, drivers queued up at petrol stations in anticipation of rising pump prices.

For European consumers, the crisis in gas supplies and the higher prices are a double whammy. The region was hit the hardest by the disruption to gas supplies due to sanctions on Russian energy imports after Russia invaded Ukraine in 2022.

Europe turned to LNG imports to substitute for Russian pipeline gas. And Europe now needs to buy 180 more LNG cargoes than it did last year to fill gas storage to the levels needed before next winter.

The supply risks to the United States are fewer, as the country has grown in recent years into the world’s largest oil and gas producer. But US crude and fuel prices rise in tandem with international crude markets, so pump prices for gasoline and diesel are affected even if domestic supply is plentiful.

US average retail gasoline, for example, hit $3.32 a gallon nationally on Friday, up 34 cents over last week, according to AAA. Diesel prices, meanwhile, hit $4.33 a gallon, up from $3.76 a gallon a week ago.

Higher prices at the pump mark a major risk for Trump and his fellow Republicans as they head into midterm elections in November.

"Gasoline prices are psychologically powerful," said Mark Malek, chief investment officer at Siebert Financial. "They are the inflation number that consumers see every single day."

Sean Robinson, a 54-year-old schoolteacher in the US capital Washington, did not realize how high gas prices had gotten until he arrived at the pump on Friday.

“That is a sizeable jump,” he told AFP, pointing to a neon sign showing $3.27 for a gallon of regular gasoline.

Robinson is among US consumers feeling the sting of a cost surge sparked by the US-Israel war on Iran, which sent oil prices soaring as Tehran effectively blocked the Strait of Hormuz after being attacked.

But the price hike comes at a politically sensitive time for President Donald Trump as midterm elections approach, hitting voters hard.

Expensive gasoline could also prompt the independent central bank to put the brakes on the world’s largest economy as it battles stubborn inflation.

Since last week, US average domestic fuel prices have risen 11 percent, according to the AAA’s fuel price gauge.

It is the kind of move that Robinson said will have him cutting down on all but the essentials.

“It just determines what I’m going to do on a day-to-day basis,” he said. “Pretty much start thinking about (watching) Netflix, staying in the house instead of burning gas.”

Others at the gas station agreed.

“It impacts all areas of life,” said Toloria Washington, 39. “We are in a state of survival mode.”

Washington, who works in finance, said fuel expenses are non-negotiable for her. With prices rising at the pump, she had to make cuts elsewhere.

That, she said, is a problem for people already battered by years of high prices post-pandemic. “That’s the key thing, it’s tapping into everybody’s basics,” she added. “It’s the basics. Daily survival of food, water, housing.”

US inflation hit a peak of 9.1 percent during the pandemic. While it has cooled since then, analysts warn of risks of another pick-up.

“Inflation showed signs of accelerating prior to the jump in energy prices,” said KPMG chief economist Diane Swonk.

“That has left consumers in a sour mood,” she added.

Swonk warned that rising fuel prices added “insult to injury” for low-income Americans, who are already seeing higher healthcare costs and a tightening of welfare benefits under Trump.

Trump, who has bragged about oil prices falling during his term, sought to address the political fallout on Friday, telling CNN he expected prices to come down quickly.

His Republican party holds only a slim majority in both the House and Senate.

With midterm elections due in November, he will be hoping that voters do not let tightening household budgets weaken his political position.

Trump could see further complications if inflation from gasoline price hikes pushes the Fed to respond by keeping interest rates at a higher level.

The central bank has a dual mandate of maintaining stable prices and maximum employment, but has one main tool to do so -- adjusting interest rates.

Raising them generally cools economic activity and reduces inflation while lowering them can spur activity, boosting the weakening employment market.

The prospect of more inflation due to oil prices raises the specter of what some analysts call a nightmare scenario.

“This could not come at a worse time for the Federal Reserve,” said KPMG’s Swonk. “It now has a dueling mandate with the risk that inflation not only lingers but accelerates.”

Fed policymakers remain cautious.

Addressing higher domestic energy prices on Friday, Federal Reserve governor Christopher Waller told Bloomberg TV he considered them “unlikely to cause sustained inflation.” But this is scant consolation for many Americans hit by even a temporary bout of price increases.

“One thing after another, it’s chaos, you know, every day,” said Lucas Tamaren, 32, at a gas pump in Los Angeles.

“Living in America feels unpredictable and chaotic and it’s hard.”

Robinson, the schoolteacher, said he will be watching gas prices every day now. He expects price pressures will be reflected at the voting booth in November.

“The more you pay higher gas, higher groceries (costs),” he said, voters will “start to see” that the middle class is shrinking.

US retail gasoline and diesel prices are soaring as the US-Israel war with Iran constrains oil and fuel exports, which could be a political test for President Donald Trump's Republican Party ahead ​of midterm elections in November.

Fuel prices jumped more than 10% this week as oil rose above $90 a barrel, its highest in years, adding pain at the ‌pump for consumers already strained by inflation. Trump on Thursday shrugged off higher gasoline prices in an interview with Reuters, opens new tab, saying "if they rise, they rise."

The president had vowed to lower energy prices and unleash US oil and gas drilling during his second term, but much of his tenure has been marked by volatility and uncertainty amid shifts in policies like tariffs and geopolitical turmoil. The US is the world's largest oil producer. It is a major exporter ​but also imports millions of barrels a day since it is the world's largest oil consumer.

As of Friday, the national average prices for regular gasoline stood at $3.32 a ​gallon, up 11% from a week ago and the highest since September 2024, according to data from the motorists association AAA. Diesel was at $4.33, ⁠up 15% from a week ago, surging to the highest since November 2023.

MIDWEST, SOUTH FEEL THE PINCH

US motorists in parts of the Midwest and the South, including states that supported Trump, have ​seen some of the steepest increases in fuel costs since the conflict in Iran started.

In Georgia, a swing state, average retail gasoline prices rose 40.1 cents a gallon over the past week, ​according to fuel tracking site GasBuddy.

Andrenna McDaniel, a healthcare insurance worker in South Fulton, Georgia, said she was surprised to see prices skyrocket overnight.

"They jumped up so quickly," she said on Friday, adding that she does not agree with the war at all.

McDaniel, a Democrat, said that for now she is only driving for the most important things, and feels lucky that she works from home so she does not have to drive as ​much as other people do.

Georgia voted for Donald Trump in the 2024 election.

Trump voter Richard Soule, 69, a US Air Force veteran and a retired firefighter, said a little pain at the pump ​is worth Trump's efforts to protect America.

"When President Trump went in there and bombed out their nuclear, and they just thumbed their nose at it, I believe he did the right thing at the right ‌time," Soule said ⁠on Friday as he filled up his Ford F-150 truck in Marietta, Georgia.

Other states, including Indiana and West Virginia have seen prices rise by 44.3 cents and 43.9 cents, respectively.

PRICES MAY RISE FURTHER

More pain may be on the way, analysts said, as oil prices continue to trend upward. On Friday, US oil futures settled at $90.90 a barrel, up nearly $10 and the biggest single-day rise since April 2020.

"Given current market conditions, the national average price of gasoline could climb toward $3.50 to $3.70 per gallon in the coming days if oil continues rising and supply disruptions persist," GasBuddy analyst Patrick De ​Haan said.

The disruptions in the Middle East and ​the Strait of Hormuz, a key trade ⁠conduit, have boosted demand for US oil abroad, which in turn has driven up prices for domestic refiners too.

"The US has weaned itself off of its dependence on Middle Eastern crude, but obviously Asian refineries, and to a lesser extent, European refineries have not," Denton Cinquegrana, chief oil ​analyst with OPIS. "That's what you're seeing happen in the spot market, because the demand for US exports rise, and so the price rise."

Seasonal ​factors could add further ⁠pressure. Gasoline prices typically go up in the spring and peak in the summer due to higher gasoline demand and production of summer-blend gasoline, which is more costly to produce.

Diesel fuel saw an even more aggressive jump since Iran began retaliating against US and Israeli strikes, significantly disrupting shipping in the Strait of Hormuz.

Global diesel inventories have remained in tight supply due to heavy demand for heating and power generation ⁠during a ​prolonged winter in the US and other parts of the world and a structural tightness of refining capacity.

Sticker prices ​of everything from food to furniture go up when the cost of diesel goes up, as the fuel is mainly used in freight transportation, manufacturing, agriculture, and global shipping, analysts said.

"In a world where buzzword seems to be 'affordability', that is ​certainly not going to help," Cinquegrana said.

China has told its largest oil refiners to suspend exports of diesel and gasoline, Bloomberg News reported Thursday, citing unidentified sources, as the war in the Middle East risks an energy supply crunch.

China is a net importer of oil and is one of several major Asian economies that depend on the vital Strait of Hormuz for energy. Traffic through the strait is currently blocked.

The Middle East was the source of 57 percent of China’s direct seaborne crude imports in 2025, according to analytics firm Kpler.

Officials from China’s top economic planner, the National Development and Reform Commission, met refinery representatives “and verbally called for a temporary suspension of refined product shipments that would begin immediately”, Bloomberg said Thursday, citing unidentified people familiar with the matter.

“The refiners were asked to stop signing new contracts and to negotiate the cancellation of already-agreed shipments,” it said.

A spokesperson for China’s foreign ministry denied knowledge of the suspension when asked about it at a regular news conference.

PetroChina, Sinopec, CNOOC, Sinochem Group and private refiner Zhejiang Petrochemical regularly obtain fuel export quotas from the government, Bloomberg said.

The companies did not respond to AFP’s requests for comment.

Gold rose on Friday after softer US payrolls data kept hopes of a Federal ‌Reserve rate cut alive, but remained on track for its first weekly decline in five weeks as a stronger dollar kept gains in check.

Spot gold was up 1.4 percent at $5,149.14 per ounce as of 01:31 p.m. ET (1831 GMT), ​but was down 2.4 percent this week. US gold futures for April delivery settled 1.6 percent higher at $5,158.70.

“An alarmingly ​weak payrolls report that saw heavy private sector job losses along with higher wages whispers stagflation; let’s see if this is enough to help gold recover from what ​has been a disappointing week,” said Tai Wong, an independent metals trader.

Data showed that nonfarm payrolls decreased ​by 92,000 jobs last month, compared with economists’ expectations for a 59,000 gain, while the unemployment rate rose to 4.4 percent.

Kuwait said it had implemented a ​precautionary reduction in crude ‌oil production and refining throughput following the ​ongoing attacks by ​Iran against Kuwait and "Iranian threats ⁠to safe passage ​of ships through the ​Strait of Hormuz," Kuwait Petroleum Corporation (KPC) said in a ​statement on Saturday.

The ​state oil company said the ‌move ⁠was part of its "risk management and business continuity strategy."

It said ​the adjustment ​was ⁠strictly precautionary and would be ​reviewed as the ​situation ⁠develops, and it remained ready to restore ⁠production ​levels once conditions ​allow.

Turmoil in the Middle East has sent investors scrambling for safety once more, reigniting a debate over which assets truly offer protection in times of stress.

The choice is complicated, as traditional refuges behave unpredictably. Gold has swung sharply and the dollar - which has ​been out of favour in the past year - has bounced back.

Here is a look at how some of the favourites stack up:

Greenback passes a test

The dollar has arguably performed ‌the best among safe havens this week.

The dollar index, which tracks the US currency against six others, is up 1.5%. The dollar has even gained against the Swiss franc and yen, which both typically outperform at times of market stress.

That is particularly notable as the dollar weakened when stocks fell following last April's tariff turmoil, raising question marks about its safe-haven status.

It is short-term dollar cash that is in demand, not other dollar assets, flow data shows.

Of course, the US is a net ​energy exporter, so a crisis like this that sends benchmark Brent crude oil above $80 a barrel should help.

"The dollar has some safe-haven characteristics, but it is context specific," said Morgan Stanley ​head of FX strategy James Lord.

And that will not always be the case, he said, because US policy uncertainty has eroded the currency's safe-haven characteristics.

No safety ⁠in sovereigns

Government bonds have struggled to attract the kind of safe-haven flows typically seen during geopolitical shocks, with investors trading them primarily on the inflation outlook rather than on their defensive qualities.

Fiscal considerations, such ​as Germany's relaxation of its debt brake, to broader worries about heavier government borrowing have also outweighed the haven appeal.

Yields on Germany's 10-year Bunds, the euro zone benchmark, have jumped 14 basis points so far this ​week.

"Germany is a flight-to-quality kind of investment, but you don't really want to be playing around at the long end of the bull market if they're raising more debt," Bryn Jones, head of fixed income for Rathbones, said.

Gold's safe-haven street cred is solid

Gold's safe-haven credibility is strong, judging by its 240% surge so far this decade.

Yes, it is proving volatile too, falling sharply on Tuesday. Analysts reckon that was partly because investors sold top-performing assets to make up for losses elsewhere, ​as concern about the Middle East conflict whacked market sentiment.

But this should not detract from gold's safe-haven status, which remains intact, given worries about inflation, geopolitics and high debt, they add.

State Street said gold ​remained under-owned in portfolio terms, with gold exchange-traded fund allocations still under 1% of global fund assets, below the 5-10% range it cites as a strategic allocation range.

"As a base case, $6,000 is more likely than $4,000 this year, and ‌we're just ⁠above $5,000," said Aakash Doshi, head of gold strategy at State Street Investment Management. "That's a clear point to make."

Classic FX refuges put to the test

The Swiss franc and the Japanese yen, long regarded as currency havens, have slipped 1.2% and 0.8% so far this week.

"The one that looks relatively attractive from a valuation perspective is still probably the Japanese yen. It stands out to me as one that can provide protection in this environment," said Justin Onuekwusi, chief investment officer at St James's Place.

But political uncertainty has added a layer of risk to the outlook for the yen after reports that Japanese Prime Minister Sanae Takaichi ​has voiced reservations about further rate hikes.

Meanwhile, analysts ​caution that the franc's upside may be constrained, ⁠given the Swiss National Bank's warning that it stands ready to step in to curb excessive strength.

"Elevated SNB intervention risks would likely diminish its haven attributes during the current shock," Goldman Sachs strategist Teresa Alves said.

Defensive stocks are not helping

Stocks often perform poorly at times of market stress, though some so-called defensive sectors, ​for example, utilities or consumer staples, typically see smaller declines.

But that has not happened this time.

The S&P utilities and consumer staples sectors are down 1% ​and 2.8%, respectively, this week, ⁠while the S&P 500 is flat. In Europe, utilities are down 3% and consumer staples are down 4.5% compared to a 3% fall for the STOXX 600.

This is partly because they had already been doing well. One big investment theme, until the war began at least, was buying "hard assets" like infrastructure and industrials.

More broadly, defensive value stocks have been outperforming growth stocks, and some have done very well.

"When you're investing in the classically defensive ⁠sectors at the ​level of current interest rates, you have to be much more disciplined about relative prices," said James Bristow, portfolio manager ​at Templeton Global Investments.

"I own shares in Pepsi, for example, ... [it] isn't the highest quality company, but the starting point was very low ... that's a different margin of safety from if you're buying shares in, say, Nestle."

Asia stocks fell on Friday (6 March) and were headed for their sharpest weekly drop in six years, ​while oil prices were poised for their biggest jump in four years in a turbulent week for global markets as the conflict in the Middle East ‌showed few signs of easing.

Investors sought the safety of cash as they sobered up to the fact that the US-Israel war on Iran could drag on longer than initially anticipated.

They also moved to price in more hawkish rate expectations from major central banks, spooked by the prospect of a resurgence in inflation if the spike in energy prices persists.

Yields on US Treasuries have shot up some 18 basis points ​this week, their most in nearly a year, while the dollar was set for its largest weekly gain in 16 months.

"The range of plausible outcomes [of ​the war] has expanded to include both the possibility of an exceptionally constructive resolution and a highly destructive one," said Daleep Singh, ⁠chief global economist at PGIM Fixed Income.

"Markets are being asked to price a much fatter set of tails with very little reliable information about the likelihood of each, ​or the path in between."

The war has thus far had the biggest impact on oil prices, with Brent crude futures now trading around $83 per barrel, having been as low ​as $69 just about a week ago. US crude shot up to a 20-month high earlier this week.

Both are set to clock a rise of more than 15% for the week, their largest since February 2022.

"The most market-relevant risk lies in severe escalation or direct infrastructure damage across key Gulf producers, which would likely produce sustained upward pressure on oil, feed into higher headline inflation, tighten global ​liquidity and materially raise recession risks," said Klay Group's senior investment team.

High-flying stocks tumble

MSCI's broadest index of Asia-Pacific shares outside Japan last traded 0.4% lower and was set ​to fall 6.6% for the week, which would mark its steepest weekly drop since March 2020.

Japan's Nikkei was down 0.5% and on track for a 6.5% weekly loss, while South Korea's Kospi was also ⁠headed for its largest weekly fall in six years with a 10.5% slide.

The market rout this week sent even high-flying technology stocks and indexes such as the Kospi tumbling, as investors scrambled to book profits to cover losses elsewhere.

"When the dollar rallies and US yields rise, funding conditions are tightening, which will often exacerbate broader moves, particularly if there's leverage involved," said Ben Bennett, head of Asia investment strategy at L&G Asset Management.

US stock futures were steady in Asia on Friday, while EUROSTOXX 50 futures rose 0.6% ​and DAX futures added 0.5%.

Dollar is king

The ​dollar has emerged as one of ⁠the few winners this week in volatile sessions that have dragged stocks, bonds and, at times, even safe-haven precious metals lower.

The rally in the dollar hit pause on Friday, but it was still on track for a 1.4% weekly gain, bolstered by safe-haven demand and ​reduced US rate-easing expectations.

The euro, which remains vulnerable to a spike in energy prices, was set to fall 1.7% for ​the week, while sterling ⁠was similarly headed for a 0.95% weekly drop.

Investors are now pricing in about 40 basis points worth of easing from the Federal Reserve this year, down from 56 bps a week ago, while odds for a rate cut from the Bank of England this month have fallen to 23% from a near certainty just last week.

The European Central Bank is seen ⁠hiking rates ​by year-end.

The shifting rate expectations have, in turn, pushed up global bond yields, and in Asia on ​Friday, the yield on the benchmark 10-year US Treasury was steady at 4.1421%, having risen some 18 bps this week.

The two-year yield has jumped 20 bps for the week.

Elsewhere, spot gold was steady at $5,078.88 an ounce, ​though it was headed for a 3.7% weekly fall as rising yields and a stronger dollar eclipsed the yellow metal's safe-haven appeal.

Gold prices rose over 1 percent on ‌Wednesday, rebounding from a more than one-week low hit in the previous session, as a widening Middle East conflict sent global markets tumbling and supported safe-haven demand.

Spot gold gained 1.5 percent to $5,164.42 ​per ounce by 0701 GMT. US gold futures for April delivery ​added 1 percent to $5,174.30.

On Tuesday, bullion fell more than 4 percent to its lowest since February 20, weighed by a firmer dollar and dimming rate-cut prospects ​as inflation concerns were intensified by fears of a prolonged war.

Gold could shrug ​off the previous session’s selloff over the coming days as the metal has swayed to its own narrative and has been resilient despite whatever the dollar and yields have been ​doing since the beginning of last year, said Ilya Spivak, head of global ​macro at Tastylive.

Oil and gas prices surged as the US-Israeli war on Iran halted energy exports ‌from the Middle East, with Tehran attacking ships and energy facilities, closing navigation in the Gulf and forcing production stoppages from Qatar to Iraq.

“Higher oil prices as a result of escalating geopolitical tensions in Iran added to inflationary concerns and complicated ​the outlook for ​monetary easing,” said Christopher Wong, a strategist at OCBC.

“The underlying fundamentals (for gold) have not materially shifted. Structural drivers such as geopolitical uncertainty, policy ​unpredictability and portfolio diversification needs remain intact,” Wong added.

Investors ​expect the US Federal Reserve to hold rates at the end of its next two-day meeting on March 18, according to the CME Group’s FedWatch tool.

Oil prices rose 1% on Wednesday as the U.S.-Israeli war on Iran disrupted Middle East supplies, but the pace of gains slowed from ‌past sessions after President Donald Trump raised the possibility of the U.S. Navy escorting vessels through the Strait of Hormuz.

Brent rose $1.17, or 1.4%, to $82.57 a barrel by 0408 GMT, after closing at its highest since January 2025 on Tuesday.

U.S. West Texas Intermediate crude rose 72 cents, or 1%, to $75.28, after settling at its highest since June. Both rose by around 5% or more in the past two sessions.

"Right now, geopolitics has clearly overtaken the usual price ⁠drivers like inventory data, U.S. economic numbers or OPEC commentary," Phillip Nova senior market analyst Priyanka Sachdeva said.

"In the near term, the key pointers to watch are physical export data from the Gulf, any confirmed tanker incidents, U.S. naval movement, and Iran's tone," she added.

Israeli and U.S. forces struck targets across Iran on Tuesday, prompting Iranian strikes against energy infrastructure in a region that accounts for just under a third of global oil production.

Iraq, the second-largest crude producer in the Organization of the Petroleum Exporting Countries, has cut output by nearly 1.5 million barrels a day, about half its production, due to storage limits and the lack of an export route, officials told Reuters. They said the country may have to shut its nearly ‌3 ⁠million bpd of output within days if exports do not resume.

Iran has also targeted tankers in the Strait of Hormuz, through which about a fifth of the world's oil and liquefied natural gas flows. Traffic through the Strait remains effectively closed.

Trump has said that the U.S. Navy could begin escorting oil tankers through the Strait of Hormuz if necessary, adding he had ordered the U.S. International Development Finance ⁠Corporation to provide political risk insurance and financial guarantees for maritime trade in the Gulf.

"The promise of such guarantees comes as insurers are cancelling war risk coverage for vessels moving through the Strait of Hormuz. This is welcome news, but clearly it won't happen overnight. ⁠Naval escorts would be helpful, but again, this effort will take time," ING analysts said in a note.

Countries and companies have begun seeking alternative routes and supplies. India and Indonesia said they were looking for other energy supplies, while some Chinese ⁠refineries were shutting or moving up maintenance plans.

In the United States, crude stocks rose by 5.6 million barrels last week, according to market sources citing American Petroleum Institute figures, well above the 2.3 million barrels analysts projected. Official figures from the U.S. government are expected later on Wednesday.

US Treasury Secretary Scott Bessent said Wednesday that Donald Trump’s 15-percent global tariff is likely to be rolled out this week, as the president moves to rebuild his trade agenda after a major legal setback.

The Supreme Court last month struck down Trump’s country-specific tariffs, which he imposed on allies and competitors alike, delivering a stinging rebuke of his signature economic policy.

Since then, the US leader has tapped a different law to impose a new 10-percent duty, and vowed to raise this level to 15 percent.

Asked when the hike will be implemented, Bessent told CNBC: “That’s likely sometime this week.”

He added that this will be done under Section 122 of the Trade Act of 1974 -- the same basis for Trump’s new 10-percent tariff -- which only allows for a duty lasting 150 days unless Congress extends it.

During this five-month window, the Trump administration will move to wrap up investigations linked to concerns over national security and unfair trade, Bessent said. These probe, in turn, could bring about new sets of tariffs.

“It’s my strong belief that the tariff rates will be back to their old rate within five months,” Bessent said.

“And those are very fulsome authorities,” he added, referring to the laws justifying these investigations.

“They have survived more than 4,000 legal challenges. They are more slow moving, but they are more robust,” Bessent said.

Oil prices surged on Monday (2 March) and shares slid as military conflict in the Middle East looked set to last weeks, sending investors flocking to the relative safety of the dollar and gold.

Brent jumped 4.5% to $76.07 a barrel, though it had briefly topped $82.00 at one stage, while US crude climbed 3.9% to $69.59 per barrel. Gold rose 1.0% to $5,327 an ounce.

Military strikes by the United States and Israel on Iran showed no sign of lessening, while Iran responded with missile barrages across the region, risking dragging its neighbours into the conflict.

President Donald Trump suggested to the Daily Mail the conflict could last for four more weeks, while posting that attacks would continue until US objectives were met.

All eyes were on the Strait of Hormuz, where around a fifth of the world's seaborne oil trade flows and 20% of its liquefied natural gas. While the vital waterway has not yet been blocked, marine tracking sites showed tankers piling up on either side of the strait wary of attack or maybe unable to get insurance for the voyage.

"The most immediate and tangible development affecting oil markets is the effective halt of traffic through the Strait of Hormuz, preventing 15 million barrels per day (bpd) of crude oil from reaching markets," said Jorge Leon, head of geopolitical analysis at Rystad Energy.

"Unless de-escalation signals emerge swiftly, we expect a significant upward repricing of oil."

A prolonged spike in oil prices would risk reigniting inflationary pressures globally, while also acting as a tax on business and consumers that could dampen demand.

OPEC+ did agree on a modest oil output boost of 206,000 barrels per day for April on Sunday, but a lot of that product still has to get out of the Middle East by tanker.

"The nearest historical analogue in our view is the Middle East oil embargo of the 1970s, which increased oil prices by 300% to around $12/bbl in 1974," said Alan Gelder, SVP of refining, chemicals and oil markets at Wood Mackenzie.

"That is only US$90/bbl in 2026 terms. Eclipsing this in today's market concerned about significant losses of supply seems very achievable."

That would be expensive for Japan, which imports all its oil, sending the Nikkei down 1.4%, with airlines among the hardest hit. Chinese blue-chips went their own way and held steady.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.2%.

And it's a big US data week

In the Middle East, the UAE and Kuwait temporarily closed their stock markets citing "exceptional circumstances".

For Europe, EUROSTOXX 50 futures shed 1.4% and DAX futures slid 1.3%. On Wall Street, S&P 500 futures and Nasdaq futures both lost 0.6%.

The oil shock rippled through currency markets with the dollar a main beneficiary. The US is a net energy exporter and Treasuries are still considered a liquid haven in times of stress, shoving the euro down 0.2% to $1.1788.

While the Japanese yen is often a safe harbour, the country imports all of its oil making the flows more two-way. The dollar added 0.1% to 156.25 yen, while gaining on the Australian dollar, which is often sold as a liquid proxy for global risk.

In bond markets, 10-year Treasury yields steadied at 3.970%, having briefly touched an 11-month low of 3.926%.

Bonds had gained a bid on Friday when UK mortgage lender MFS was placed into administration following allegations of financial irregularities. Its collapse stoked wider credit fears, with well-known big banks among its lenders. MFS had borrowed 2 billion pounds ($2.69 billion).

The news slugged banking stocks and combined with jitters over AI-related stocks to hit Wall Street more broadly.

Investors also have to weather a squall of US economic data this week, including the ISM survey of manufacturing, retail sales and the always vital payrolls report.

Any weakness could shake confidence in the economy after a disappointing fourth quarter, but would also likely narrow the odds on rate cuts from the Federal Reserve.

Markets currently imply a 50% chance of an easing in June and about 60 basis points of cuts this year.