The Iran crisis impacted the global market: the three major U.S. stock index futures all fell 0.7%, Pakistan triggered a circuit breaker, oil prices jumped 13% but the increase narrowed significantly, and gold fell back to $5,330.

# Dong Jing, Zhang Yaqi

Source: Wall Street CN

The core of this round of market turmoil lies in the shock to global crude oil supplies. Brent crude surged as much as 13% early in the session before paring gains sharply, with price action milder than expected. News of the effective closure of the Strait of Hormuz has sent the global crude market into violent turmoil. Estimates suggest that should the Strait of Hormuz remain blocked, oil prices could surge to **$108 per barrel**.

Asian stocks tumbled sharply on Monday, international oil prices posted their biggest one-day gain in four years, and safe-haven assets strengthened across the board. A sharp escalation in Middle East tensions is injecting a new wave of uncertainty into an already fragile global financial market.

Brent crude surged more than 13% during the session before narrowing to $77.51 a barrel, a gain of about 6.4% — the largest one-day rise since March 2022. The Asian stock index fell 1.4%, while Pakistan’s stock market plunged 9.6%, triggering a trading halt. U.S. stock futures dropped 0.7%. Gold rose 1.4% to around $5,350 an ounce, and the U.S. dollar edged up 0.2%.

This geopolitical shock, combined with existing risks such as uncertainty over the outlook for artificial intelligence and cracks in the private credit market, is testing the foundation supporting global asset valuations. Last month, U.S. stocks recorded their biggest monthly drop since April.

## Key Market Moves

- Pakistan’s stock market fell 9.6%, triggering a trading halt.

- India’s NIFTY 50 index recovered some losses, down 1%.

- As of morning close, Japan’s Nikkei 225 fell 1.5%, Topix fell 1.6%.

- S&P 500 futures: -0.78%; Dow futures: -0.73%; Nasdaq 100 futures: -0.73%.

- Australia S&P/ASX 200: -0.4%; MSCI Asia Pacific Index: -1.1%.

- Bloomberg Dollar Spot Index: nearly flat.

- Euro: -0.3% to $1.1781; Japanese yen: -0.2% to 156.35 per dollar.

- Australia 10-year government bond yield: -4 bps to 4.61%.

- Brent crude futures: +7.5% to $78.34/bbl; WTI crude: +7.3% to $71.94/bbl.

- Spot gold: +2% to $5,388.23/oz; Spot silver: +1.5% to $95.23/oz.

- Bitcoin: +0.2% to $65,831.73; Ethereum: +0.4% to $1,937.81.

## Pakistan Stock Market Hits Circuit Breaker

Pakistan’s capital markets suffered an especially severe shock. The KSE-30 index plummeted 9.6% in early trading, triggering a circuit breaker at the Pakistan Stock Exchange and suspending trading for one hour. Bilal Khan, head of international equity sales at Arif Habib, noted that “the overall situation in the Middle East and domestic protests in support of Iran have both hit the market hard.” He also expected buying interest to emerge later in the session as weak hands had mostly exited.

Ali Raza, head of international equity trading at BMA Capital Management, said brokers enforced forced liquidations on leveraged retail accounts, further exacerbating the sell-off.

Indian stocks also faced pressure. Nifty 50 index futures fell as much as 1.7% in early trading, with major indexes down about 1.2%, and the rupee weakened against the U.S. dollar.

With about 90% of India’s oil dependent on imports, rising oil prices have a particularly direct impact on its economy. Airlines, paints, tires, specialty chemicals, and oil marketing stocks are expected to face significant selling pressure; defense and gold-related stocks may attract inflows. Indian markets will be closed on Tuesday for the Diwali holiday.

## Strait of Hormuz: “Worst-Case Scenario” Materializes

The core driver of the oil price surge is the Strait of Hormuz. Data signals show tanker traffic through the strait has nearly stalled, with three vessels attacked near the mouth of the Persian Gulf. About one-fifth of the world’s oil supply flows through this waterway, making its strategic position irreplaceable.

Crude futures spiked more than 13% at the start of trading, but were quickly hit by profit-taking, with gains rapidly narrowing to around 4.5%. Gold and silver rose in tandem, both climbing more than 1%, though the moves appeared relatively mild given recent volatility across commodity markets. The U.S. dollar strengthened in early trading, but momentum faded at the margin, even as the greenback remains the clearest thematic trend in foreign exchange.

According to Bloomberg Economics, if the Strait of Hormuz remains blocked, oil prices could jump further to $108 per barrel. Jason Lui, strategist at BNP Paribas, said traders are closely monitoring commodity markets to gauge the duration of the conflict.

Sustained higher oil prices will further complicate the Federal Reserve’s monetary policy path. U.S. producer price index data released on Friday came in above expectations; if energy costs push inflation higher, Treasury yields — which had fallen on safe-haven demand — will face upward pressure.

## Multiple Pressures Compound, Equities Under Greater Stress

Asian stocks suffered their biggest drop in a month on Monday. The region’s equities had rallied consistently from December last year to February this year, outperforming U.S. and European benchmarks. However, the sudden escalation of geopolitical risks has fully exposed market fragility.

Japan’s Topix banking index tumbled as much as 6.3%, its biggest drop since April, fueled by concerns over the credit market — worries about a “cockroach effect” in the private credit space, a key funding source for tech firms, are spreading.

U.S. stock futures are down roughly 0.7%, having rebounded significantly from their opening lows. Analyst Mark Cudmore noted that most non‑energy assets have seen contained volatility and have generally pulled back from extreme opening levels.

This geopolitical conflict is not taking place amid calm conditions. Dec Mullarkey, Managing Director at SLC Management, said:

“All this is happening at a fragile moment, and investors are growing increasingly cautious. U.S. equities are already highly sensitive to tech disruption risks and credit pressures. The prospect of higher commodity prices could force investors to scale back risk exposure further and trigger selling.”

Adam Hetts, Global Head of Multi-Asset at Janus Henderson, wrote in a research note:

“The U.S.-led strike on Iran has pushed oil higher and reignited geopolitical risk. Our view is that markets are currently pricing a limited conflict. Unless the situation evolves into a prolonged standoff, the impact on broader investments remains contained. As always, diversification and a long-term view matter most when uncertainty peaks.”

Notably, markets have shrugged off geopolitical tensions several times before — when the U.S. struck Iranian nuclear facilities last June, stocks barely reacted. But Ajay Rajadhyaksha, Chairman of Global Research at Barclays, warned that this conflict’s scale and potential global economic impact are far larger than prior episodes, and investors should not rush to buy the dip.

“The risk-reward is not attractive. If stocks correct meaningfully — say, the S&P 500 falls more than 10% — a buying opportunity may emerge, but that time is not now.”

## Treasuries Face Dilemma, Market Direction Unclear

Geopolitical conflict has also put U.S. Treasury market momentum in a contradictory position.

Heightened safe-haven demand should theoretically push capital into bonds and press yields lower; but sustained oil price gains, if passed through to broader inflation expectations, would exert upward pressure on yields. These opposing forces have complicated the investment case for Treasuries.

Michael Ball, Bloomberg macro strategist, noted: “The instinctive market reaction to weekend events will be to avoid risk. Buying appetite on dips is likely to be subdued until the scale and duration of the conflict become clearer.”

## Risk Warning and Disclaimer

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