Oil Prices Surge Past $120 as US Weighs Military Strikes Against Iran

Oil prices have surged above $120 per barrel, reaching wartime highs amid escalating tensions in the US-Iran conflict, with reports indicating President Donald Trump is set to receive a briefing on new military options against Iran. According to Axios, as reported by the BBC, US Central Command has prepared plans for "short and powerful" strikes, while Trump has publicly urged Tehran to "get smart soon" and reach an agreement, according to The Independent. This comes as Iran reportedly imposes an extended blockade, exacerbating fears of disruptions in the Strait of Hormuz, a critical chokepoint for global oil shipments.

The spike in crude prices, with Brent oil jumping as much as 7% in a single session, has triggered widespread market volatility. Bloomberg reports stocks swinging to losses after initial gains from tech earnings, while a war premium is igniting rallies in commodities like corn due to soaring fertilizer and energy costs. Asian markets show a split picture: an AI-led rally in tech stocks is masking deeper damage from the conflict, but currencies across the region are hitting record lows as oil's rise revives economic risks. India's rupee, for instance, has slid to an all-time low, deepening worries about the country's external deficit, as noted by Bloomberg.

Iran itself is feeling the squeeze from a US naval blockade, which has pushed its currency to a fresh record low, signaling severe pressure on the Islamic Republic's economy. This blockade, combined with the broader war, is abandoning hopes for a quick resolution and fueling a crude awakening on inflation risks worldwide. In Bloomberg's Daybreak Europe podcast, analysts highlighted how the oil spikes on war threats are rippling through global energy markets.

The conflict's fallout is hitting major economies hard, particularly oil-importing nations like India. The Indian Finance Ministry warned in its monthly review that supply shocks from the Middle East war are boosting costs and threatening domestic demand, with the Reserve Bank of India noting a sharp rise in the World Bank Commodity Price Index due to energy and fertilizer prices. Economists polled by Reuters affirm India's growth outlook remains steady despite these headwinds, though stress is building in the informal sector. Former IMF Deputy Managing Director Gita Gopinath has cautioned that if oil hits $100—already surpassed—global growth could drop from 3.4% to just 2.5%, evoking the largest oil shock since the 1970s.

Consumers worldwide face higher fuel and food prices, while producers in agriculture and manufacturing grapple with elevated input costs, potentially curbing growth and stoking inflation. Asia's fragile currencies underscore the uneven strain, with Morgan Stanley analysts noting India's fundamentals holding amid the chaos but warning of clouded outlooks.

What happens next hinges on Trump's decision after the military briefing and Iran's response to the blockade. Diplomatic efforts appear stalled, with pessimism growing over ending the Middle East conflict soon. Markets remain on edge, bracing for further escalation that could prolong these shocks and reshape global trade routes through the Strait of Hormuz.