Crude oil prices are up 8% and stock markets around the world are plunging after U.S. President Donald Trump threatened to escalate the war with Iran.
In a televised speech, Trump warned of further military aggression against Iran and offered no clear timeline to end the conflict, rattling energy and equity markets.
West Texas Intermediate (WTI) crude oil, the U.S. standard, is up 8% at $107.99 U.S. per barrel in early trading on April 2.
Brent crude oil, the international benchmark, is up 7% and trading at $108.63 U.S. a barrel.
At the same time, stocks are plunging, with the blue-chip Dow Jones Industrial Average down more than 500 points in premarket trading.
Stock markets across Europe and Asia fell about 2% on the day as concerns rise about an energy shock and the resulting inflation.
Trump said the U.S. will “hit” Iran “extremely hard” over the next two to three weeks during a national address.
The comments have led to further market volatility and are driving a risk-off sentiment among investors who are waiting for uncertainty from the Iran war to subside.
Of particular concern is the Strait of Hormuz, where 20% of the world’s oil and natural gas typically flows.
Those shipments have effectively ground to a halt since the U.S.-Israel war against Iran began on Feb. 28, sending energy prices soaring as a result.
Oil tanker traffic through the Strait of Hormuz now looks unlikely to resume anytime soon.
Surging energy costs are expected to lead to a spike in inflation, which could cause central banks to raise interest rates later this year, further hurting investor sentiment and stock markets.
