Sunday evening saw a spike in oil prices and a decline in stock futures, suggesting that investors were worried about potential economic repercussions from the ongoing Middle East unrest in the wake of U.S. strikes on Iran’s nuclear facilities.
Oil is the main focus. In addition to being a significant global supplier of oil, Iran is situated on the Strait of Hormuz, a busy Persian Gulf waterway that serves as a vital transit route for roughly one-fifth of the world’s oil supply.
The main worry was whether Iran would start restricting or blocking access to the strait. In a statement, U.S. Secretary of State Marco Rubio said that closing the strait would be “economic suicide” for Iran and urged China, its main trading partner, to stop Iran from influencing traffic.
Concerns about the conflict’s potential effects on global oil supplies were highlighted by the 4% opening of U.S. and global oil benchmark prices on Sunday night.
By Sunday evening at 9 p.m., those gains had somewhat slowed. Following Israel’s initial strikes against Iranian targets and Iran’s retaliatory missile attacks, oil prices already increased by roughly 3% last week.
On Sunday, stocks also fell. In the first hour of trading, Dow Jones Industrial Average futures dropped roughly 250 points, or 0.6%, while S&P 500 futures contracts opened up roughly 0.6%.
Futures on the Nasdaq 100 fell 0.7%. By 9 p.m., they had somewhat reduced those initial losses, much like oil. On Monday, U.S. markets formally open at 9:30 a.m. ET.
In a message to clients on Sunday, Andy Lipow, president of the consulting firm Lipow Oil Associates, stated that “should oil exports through the Strait of Hormuz be affected, we could easily see $100 oil” or a 75-cent increase in U.S. gas prices per gallon.
According to Lipow, U.S. gas prices could rise by up to $1.25 per gallon in the worst-case scenario, where oil prices reach at least $120 per barrel.
In a subsequent email, Lipow stated that any move by a tanker company to proactively lessen its presence in the strait constitutes “a de facto supply disruption,” even if the strait does not formally close.
According to Iran’s state-run media, the country’s parliament supported closing the strait, but the Iranian National Security Council has the last say.
Iran’s own economy, especially trade with China, could be negatively impacted by any action it takes to change traffic in the strait.
A U.K. Royal Navy department reported on Sunday that it had detected “electronic interference in the Strait of Hormuz.”
There were reports of at least two huge supertankers making U-turns after entering the strait. The ships also turned around halfway through the strait, according to marine tracking websites.
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As it considers its next course of action, Iran might still be estimating the final damage to its nuclear facilities.
Although it confirmed that the Fordo, Natanz, and Isfahan sites had been struck, the International Atomic Energy Agency stated on Sunday that it was not yet possible to evaluate the extent of the damage at the Fordo site.
U.S. stocks had been recovering significantly, albeit erratically, from the lows that followed President Donald Trump’s announcement of reciprocal tariffs in April until last week.
After Israel declared last weekend that it had hit important Iranian military and nuclear targets, Iran launched retaliatory missile strikes on Israeli targets, reversing that momentum.
Investors had expressed worries to JPMorgan analysts last week that the Iran-Israel conflict would escalate, “and those concerns have been materialized,” the analysts said on Sunday.
The S&P 500 is up less than 2% so far this year.
