Global markets lurched lower on Thursday after US President Donald Trump used a prime-time address to say military objectives against Iran would be completed “very shortly” while also warning Tehran it would be hit “extremely hard” if no deal is reached, a combination that deepened fears of a wider and longer conflict rather than calming them. The immediate reaction was brutal: oil surged above $100 a barrel, equities fell across Asia and Europe, and investors rushed back into the dollar as a haven. The sharpest signal came from crude. Brent rose about 6.8% to roughly $108 a barrel, while US West Texas Intermediate climbed above $106, reversing earlier optimism that Washington might be preparing to wind down the campaign. Traders focused less on Trump’s claim that the military was close to achieving its aims and more on what he did not provide: a firm end date, a ceasefire framework or any clear diplomatic pathway. That left the market to price in a prolonged disruption to Gulf energy flows at a time when the Strait of Hormuz remains central to the risk calculation.
Equity investors responded with the kind of broad-based selling that usually accompanies fears of an energy shock. Reuters reported Japan’s Nikkei fell 2.4%, South Korea’s Kospi dropped 4.7%, and US futures slid, with Nasdaq futures down more than 1.5% and the Russell 2000 off almost 2%. In Europe, the STOXX 600 lost about 1.2%, with technology and mining shares among the biggest fallers. Airlines also came under pressure as higher fuel costs threatened margins, underlining how quickly a geopolitical shock in the Gulf can spill into boardrooms far from the battlefield.
Currency and bond markets added another layer to the warning. The dollar index rose about 0.5%, sterling slipped 0.7% against the US currency, and benchmark Treasury yields pushed higher, with the 10-year US yield around 4.376%. That combination matters because it signals investors are not simply seeking safety; they are also reassessing the inflation outlook. Costlier oil raises the prospect of sticky consumer prices just as many central banks were hoping for room to ease policy. Instead, the market has revived an older fear: that the world economy could face weaker growth and stronger inflation at the same time.
Trump’s language was at the centre of the repricing. According to Associated Press and Reuters reporting, the address blended assertions that the operation was nearing its goals with a threat of heavier strikes over the next two to three weeks if Tehran failed to yield. For investors, that sounded less like closure than open-ended escalation. The confusion was amplified because markets had rallied a day earlier on hopes that the White House might be preparing a clearer exit from the confrontation. Thursday’s reversal showed how dependent sentiment has become on every shift in Washington’s tone.
The energy shock is not only about headline prices. Analysts have been warning that any sustained interference with shipping through Hormuz would reverberate through refining, petrochemicals, freight and food supply chains. Reuters cited concerns that naphtha shortages and broader goods-flow disruptions could damage factory output, particularly in Asia. AP separately noted that emergency stock releases and alternative routing have not fully offset the strain created by the war and maritime insecurity. That is why the market’s reaction spread well beyond oil majors and defence shares to banks, industrials and consumer-facing companies.
The fallout was especially visible in import-dependent economies. Reuters reported that benchmarks in India fell almost 2%, with financials and banks among the hardest hit as investors recalibrated for higher energy costs and tighter conditions. In Europe, traders also marked down sectors exposed to fuel and transport costs while lifting energy stocks. Such moves suggest investors see this not as a contained regional event but as a macroeconomic threat that could alter earnings forecasts, monetary-policy bets and capital flows over the coming weeks.