Gulf Stocks Tumble and Oil Hits $126 as U.S. Weighs Military Strikes Against Iran

Gulf stock markets tumbled at the start of trading Thursday amid reports that the United States is weighing military strikes against Iran, fueling widespread fears of escalation in the ongoing conflict. Oil prices surged dramatically, with Brent crude briefly topping $126 a barrel—its highest in four years—before pulling back, as stalled U.S.-Iran talks cast doubt on reopening the Strait of Hormuz and ending the war. According to Asharq Al-Awsat, most Gulf bourses declined sharply, reflecting investor anxiety over potential disruptions to the region's energy-dependent economies.

The spike in oil was driven by concerns over the U.S. naval blockade of Iranian ports, which has prompted Tehran to impose severe restrictions on commercial shipping through the Strait of Hormuz, creating a gridlock of tankers and choking global energy supplies. CBS News reported that Brent crude for June delivery jumped 3.3% to $121.90 after touching $126, while U.S. benchmark WTI rose 1.3% to $108.28. ABC11 noted the global benchmark hit $126.41 overnight before easing to $116.3, pushing U.S. gasoline prices to a four-year high of $4.30 per gallon. Trading Economics highlighted Brent futures climbing above $113 earlier in the session, the highest since 2022, after reports that President Donald Trump would be briefed on expanded military options against Iran.

These developments rippled across global markets. Japan's Nikkei index fell as oil prices rose and corporate earnings disappointed, per Asharq Al-Awsat. European stocks also declined amid escalating Middle East tensions, with the same outlet reporting continued oil gains exacerbating the sell-off. The U.S. dollar strengthened to a two-week peak, bolstered by hawkish Federal Reserve signals and the energy price surge. Even gold, typically a safe-haven asset, edged toward a second monthly loss despite a slight daily uptick from bargain hunting, as reported by Asharq Al-Awsat.

The conflict's toll is mounting. Defense Secretary Pete Hegseth faced tough questions from senators for a second day after dodging queries on the war's duration and cost, which a Pentagon official pegged at around $25 billion so far for U.S. taxpayers. President Trump has vowed to maintain the blockade until a nuclear agreement is secured, while discussing measures to shield domestic consumers from higher energy costs during talks with oil executives. Barchart observed that while crude initially rallied on escalation fears, it later fell amid worries that soaring prices could stifle global demand and economic growth.

For Gulf nations like Saudi Arabia, UAE, and Qatar, heavily reliant on oil exports, the volatility threatens budgets and stability, potentially delaying diversification efforts. Consumers worldwide face steeper fuel and inflation pressures, with implications for everything from transportation to manufacturing. As reported by Axios via Trading Economics, U.S. Central Command's briefing on a possible short, intense wave of strikes signals that renewed combat remains under active review, leaving markets on edge.

What happens next hinges on diplomatic breakthroughs or further military moves. Stalled talks and the Hormuz impasse keep supply risks elevated, with analysts watching Trump's decisions closely. While oil pared some gains by late Thursday—Brent settling around $110-$113—any intensification could propel prices higher, prolonging market unease and economic strain across the region and beyond.