Oil jumps 5 percent as Trump's Iran threat rattles markets

A presidential address threatening renewed military action against Iran torpedoed market optimism Tuesday, sparking a flight from risk assets that erased gains in equities and crypto while pushing crude oil prices over 5 percent higher to more than $106 per barrel.

“The conflict has significantly influenced the market landscape, creating a highly dynamic and unpredictable environment,” said Ed Egilinsky, managing director at Direxion. “Investors ought to prepare for continued volatility within equity markets, as prices may swing in either direction until more definitive guidance is available.”

The sell-off was broad. West Texas Intermediate crude futures surged 5.3% to settle just under $105, after trading above $106 intraday. Brent crude, the global benchmark, settled at $112.57. In equities, the S&P 500 fell 0.4%, while the tech-heavy Nasdaq Composite dropped 0.75%, putting both in correction territory for the month. The rout extended to digital assets, with Bitcoin falling back to $66,500, while altcoins like Ether and Solana posted steeper losses.

The renewed volatility underscores the market’s vulnerability to geopolitical headlines from the month-long conflict. With the Strait of Hormuz, a critical oil chokepoint handling over 20 percent of global oil trade, effectively disrupted, investors are weighing the increasing probability of a stagflationary outcome. The next key date is the Federal Reserve's upcoming meeting, where officials must decide whether to act on the inflationary impact of an energy shock that has seen gasoline prices nationwide soar past $4 a gallon.

The market's sharp reversal came despite comments from Federal Reserve Chairman Jerome Powell on Monday, who suggested the central bank would look past the initial energy price shock, citing inflation expectations that remain "well anchored." That message had temporarily soothed the bond market, with the 10-year Treasury yield falling nine basis points to 4.35%. However, the president's rhetoric quickly overshadowed the Fed's dovish stance, with traders rapidly repricing the odds of a 2026 rate hike.

Trump's go-to strategy of using social media and public remarks to manage market expectations appears to be yielding diminishing returns as the war drags on. "As the messaging to calm markets with false reassurances is having diminishing credibility in financial markets, so, too, has Trump diminished public confidence,” said Jeffrey Sonnenfeld, a professor at the Yale University School of Management.

Global Markets Under Pressure

The impact has been felt globally, particularly in energy-dependent nations. South Korea’s Kospi index, a top performer in 2025, has fallen nearly 20 percent in March due to the country's sensitivity to energy shocks. In Europe, strategists at Goldman Sachs noted the "balance of risks has worsened," warning that markets are not fully pricing in the potential for stagflation, which has historically led to further equity downside and weak real returns. The US dollar index has benefited from the risk-off turn, gaining around 3 percent in March as investors seek safety, a move that strategists at OCBC expect to persist in the near term.

Commodities Feel the Heat

Beyond oil, other commodities have been volatile. Gold, typically a safe-haven asset, has sold off and is on track for its worst month since 2008, weighed down by the stronger dollar and the prospect of higher interest rates. Still, some analysts remain bullish. "Our view is that the decline in gold is likely to be relatively short-lived," said Mark Haefele, Global Wealth Management Chief Investment Officer at UBS, who forecasts a rebound to $6,200 an ounce by the end of June. Industrial metals like aluminum and copper have also been rocky, reflecting fears of supply shortages and broad economic pessimism. The last time a similar geopolitical shock occurred in the region, Brent crude jumped over 15% in a single week, a precedent that keeps energy traders on high alert.

This article is for informational purposes only and does not constitute investment advice.