US strike in Iran sends oil surging past $89 on fears of wider conflict

Reports of a US military airstrike inside Iranian territory sent shockwaves through global markets, with crude oil prices jumping over 3 percent on fears of a wider regional conflict that could threaten critical energy supplies.

"From the night of April 4 to the early morning of April 5, US military aircraft bombed several areas in Iran's Kohgiluyeh and Boyer-Ahmad province," Iran's Tasnim News Agency reported, citing an unnamed Iranian military source. The report claimed the US was targeting a downed pilot it could not locate.

The news triggered an immediate flight to safety. West Texas Intermediate crude futures for May delivery surged 3.8 percent to $89.84 a barrel, the highest since October. Meanwhile, spot gold, a traditional haven asset, climbed 1.2 percent to $2,318 per ounce. Equity markets retreated, with S&P 500 futures pointing to a 1.5 percent lower open as investors braced for potential escalation.

At stake is the stability of global oil transit through the Strait of Hormuz, a narrow waterway through which about 21 percent of the world's daily oil consumption passes. Any disruption could lead to a severe energy shock, pushing inflation higher and weighing on global economic growth. The Cboe Volatility Index (VIX), Wall Street's "fear gauge," jumped 4 points to 19.5, reflecting rising hedging demand.

The alleged strike follows a period of heightened tensions in the Middle East. While US officials have not confirmed the operation, the report alone was enough to reverse recent market complacency. The development recalls the aftermath of the 2019 attack on Saudi Aramco's facilities, which temporarily knocked out about 5 percent of global oil supply and sent Brent crude prices nearly 20 percent higher in a single day.

Investors are now closely watching for any official response from Washington or Tehran. The key question is whether this is an isolated incident or the beginning of a direct military exchange. A broader conflict could draw in other regional powers and lead to sustained pressure on energy prices, complicating the inflation fight for central banks like the Federal Reserve, which has held its policy rate steady at a 23-year high of 5.25-5.50 percent since July 2023. The market's reaction suggests traders are not waiting for confirmation to price in a significantly higher risk premium.

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