Oil prices climbed sharply Monday after the United States and Iran carried out military strikes against each other, raising fears that a fragile peace deal between the two nations is now on the verge of collapse. The exchanges mark the first direct military confrontation between Washington and Tehran in years, and they come at a moment when global markets were already bracing for higher energy costs.
Strikes throw peace deal into doubt
The attacks — which both sides confirmed — have cast serious uncertainty over the diplomatic track that had been slowly advancing between the two countries. Negotiations aimed at a comprehensive agreement had shown signs of progress in recent months, but the overnight strikes have effectively paused any forward movement. Officials on both sides have not commented publicly on whether talks will resume.
Rising oil prices fuel inflation fears
Brent crude jumped more than 4% in early trading, with West Texas Intermediate posting similar gains. Analysts — without being named in official statements — attribute the spike to the immediate risk of supply disruptions in the Persian Gulf. The price surge adds to existing inflationary pressures that have already squeezed households and businesses around the world. Central banks, still grappling with elevated inflation, now face a fresh challenge: a sustained oil rally could push consumer prices higher and delay interest rate cuts that markets had been expecting.
Diplomatic efforts face new hurdles
The military strikes have complicated efforts by intermediaries — including European and Gulf states — to keep the peace process alive. Those mediators had been shuttling between Washington and Tehran for months, trying to bridge differences over Iran's nuclear program and regional security. With both capitals now in a confrontational stance, the diplomatic track has lost its footing. No new rounds of talks have been scheduled.
Financial markets on edge
Stock markets in Asia and Europe opened lower, and safe-haven assets such as gold and government bonds saw inflows. The broader concern among investors is that a prolonged military standoff between the US and Iran could destabilize financial markets, especially if it leads to a blockade of the Strait of Hormuz, through which about a fifth of the world's oil passes. So far, shipping lanes remain open, but insurance premiums for vessels in the region have already risen.
The next few days will be critical. Neither the White House nor Iran's foreign ministry has indicated whether further strikes are planned, leaving traders, diplomats and central bankers waiting for the next move.
