A widening conflict in the Middle East sent tremors through global financial markets Tuesday, triggering sharp stock-market declines from New York to Seoul and briefly igniting a surge in oil prices that revived fears of economic slowdown and fresh inflationary pressure. Investors recoiled as tensions threatened access to the Strait of Hormuz, a vital maritime artery that carries roughly one-fifth of the world’s oil supply.
The Dow Jones Industrial Average plunged more than 1,200 points in early trading, putting it on track for its worst session since April. Major European and Asian indexes followed suit, with heavy losses across London, Frankfurt, Tokyo and Seoul. The S&P 500 and the Nasdaq composite each closed down roughly 1 percent, while the Dow ended the day lower by 0.8 percent, or about 404 points, marking its third consecutive daily decline.
Oil markets initially reacted with alarm. U.S. crude futures jumped sharply before paring gains to settle 4.7 percent higher at $74.56 a barrel. The spike came after an Iranian commander reportedly threatened to set fire to vessels transiting the Strait of Hormuz, a chokepoint through which oil flows from Saudi Arabia, Qatar and other major producers. Diesel futures rose to $3.19 a gallon, their highest settlement since 2023, signaling potential cost pressures for truckers and households reliant on heating oil.
Market sentiment steadied somewhat after President Trump announced on social media that he had directed the U.S. International Development Finance Corp. to provide insurance and guarantees for maritime trade in the Persian Gulf and offered naval escorts to oil tankers if necessary. The reassurance helped major U.S. benchmarks claw back some earlier losses by midafternoon.
The selloff was broad and unforgiving. Technology, industrial and materials stocks all fell sharply, and even energy shares, which had rallied earlier in anticipation of higher oil prices, were dragged down. Companies tied to commodities and semiconductors were among the hardest hit, reflecting concerns about global demand and already elevated market valuations.
Analysts said the geopolitical shock struck a market trading at historically expensive levels and already grappling with uncertainty over heavy spending on artificial intelligence and its potential to disrupt established industries. The latest developments, some argued, served as a tipping point for investors who had largely brushed aside earlier warnings of escalation.
In Europe, major indexes posted their steepest one-day declines since April. South Korea’s Kospi tumbled more than 7 percent, its largest single-day drop in over a year, while Japan’s Nikkei 225 fell over 3 percent. Hong Kong’s Hang Seng and other regional benchmarks also slid, underscoring the global scope of the anxiety.
Bond markets reflected shifting inflation expectations. U.S. Treasury yields initially rose as traders worried that sustained energy-price increases could push inflation higher. The yield on the 10-year Treasury note edged up to 4.056 percent before retreating after remarks from New York Federal Reserve President John Williams suggesting that cooling inflation could open the door to interest-rate cuts.
Investors sought safety in the U.S. dollar, which strengthened against a range of emerging-market currencies including the Chilean peso, Brazilian real and Hungarian forint. In an unusual move for a period of geopolitical turmoil, gold prices fell 3.5 percent to $5,107.40 a troy ounce, reflecting volatile positioning across asset classes.
