Global Markets Face Sharp Losses as Oil Prices Surge Amid Middle East Conflict

Global stock markets experienced a slight relief on Friday as oil prices eased after days of sharp gains, though most Asian markets remained on track for their steepest weekly declines in six years amid ongoing conflict in the Middle East.

Brent crude futures last traded at $84.73 per barrel, on course for a 17 percent rise for the week, while US crude slipped to $80 per barrel after reaching a 20-month high. Despite Friday’s pullback, oil prices are still on track for their largest weekly gain since Russia launched its full-scale invasion of Ukraine in February 2022. The easing came as reports emerged that the US government is considering intervention in the futures market to curb rising energy costs.

Market analysts described the moves as a period of consolidation. Michael Brown, senior research strategist at Pepperstone, said, “Markets are chopping around current levels as a ‘wait and see’ approach takes precedence for the time being.”

The US-Israel war on Iran triggered volatility across global markets this week, prompting investors to seek safer assets. Traders also adjusted expectations for central bank policies, pricing in the possibility of tighter interest rates if energy-driven inflation persists. Yields on US Treasuries rose about 18 basis points this week, their largest increase in nearly a year, while the US dollar recorded its biggest weekly gain in 16 months.

Daleep Singh, chief global economist at PGIM Fixed Income, noted, “The range of plausible outcomes of the war has expanded to include both the possibility of an exceptionally constructive resolution and a highly destructive one. Markets are being asked to price a much fatter set of tails with very little reliable information about the likelihood of each.”

In Asia, EUROSTOXX 50 futures rose 0.95 percent, FTSE futures gained 0.5 percent, and DAX futures climbed 0.8 percent. US equity futures also edged higher, with Nasdaq up 0.27 percent and S&P 500 futures rising 0.16 percent.

Despite this, regional equity benchmarks faced steep weekly losses. MSCI’s broadest index of Asia-Pacific shares outside Japan traded 0.2 percent higher on Friday but was set for a six percent drop over the week. Japan’s Nikkei rose 0.6 percent, yet it was on track for a 5.5 percent weekly loss, while South Korea’s Kospi faced a 10.5 percent slide, its largest weekly fall in six years. Technology stocks and high-performing indexes bore the brunt of the rout as investors booked profits to cover losses elsewhere.

The US dollar remained a key beneficiary of the turmoil, supported by safe-haven demand and expectations of reduced rate cuts. The euro and sterling are both set for weekly declines, pressured by rising energy costs and changing monetary outlooks. In the bond market, yields on the benchmark 10-year US Treasury steadied at 4.1421 percent, following an 18-basis-point weekly increase, while the two-year yield rose 20 basis points.

Spot gold was steady at $5,118.79 an ounce but headed for a three percent weekly fall as higher yields and a stronger dollar weighed on its appeal as a safe-haven asset.