Global Stocks Slide as Fears Grow of Prolonged Iran Conflict
Mounting concerns that fighting in the Middle East could drag on sent global markets sharply lower Tuesday, as investors reassessed the economic fallout of an expanding conflict.
US equities swung wildly before closing down for a second straight session. The Dow Jones Industrial Average finished 355 points lower, a drop of 0.73%, after plunging more than 1,200 points earlier in the day. The S&P 500 slipped 0.78%, and the Nasdaq Composite fell 0.82%, each trimming losses that had topped 2% at their worst.
Market volatility intensified. The VIX, widely viewed as Wall Street’s fear indicator, climbed 9% to its highest level in three months.
The selloff was not confined to the United States. European and Asian markets also declined for a second day. The pan-European Stoxx 600 lost 3.08%. Japan’s Nikkei 225 dropped 3.06%. South Korea’s Kospi sank 7.24%, its steepest one-day decline since April. South Korean markets had been closed on Monday for a public holiday.
Investor anxiety deepened as military operations entered a fourth consecutive day. Israel announced it was carrying out “simultaneous strikes in Tehran and Beirut,” aimed at Iranian military targets and the Iran-backed group Hezbollah.
Sources told CNN that US embassies in Saudi Arabia and Kuwait were struck amid Iranian bombardment. In response to escalating security risks, non-emergency US government personnel in Jordan, Bahrain, Iraq, Qatar, Kuwait and the United Arab Emirates have been ordered to leave.
President Donald Trump signaled uncertainty about the duration of the campaign. In a letter to Sen. Chuck Grassley on Monday, he wrote, “It is not possible at this time to know the full scope and duration of military operations that may be necessary.”
“These strikes were undertaken to protect United States forces in the region, protect the United States homeland, advance vital United States national interests, including ensuring the free flow of maritime commerce through the Strait of Hormuz, and in collective self-defense of our regional allies, including Israel.”
Taking questions Tuesday at the White House, Trump defended the decision to strike Iran, describing it as “something that had to be done.” He asserted that “just about everything’s been knocked out” in reference to Iran’s military infrastructure and voiced surprise that Iran chose to retaliate against neighboring countries.
Energy markets reflected fears of supply disruptions. Iran said Monday it would target any vessel attempting to move through the Strait of Hormuz, a strategic chokepoint that carries roughly 20% of global oil consumption. With hostilities ongoing, shipping companies and insurers have grown wary of sending vessels through the narrow waterway.
Crude prices extended their rally. US oil rose 5.9% Tuesday to $75.40 per barrel, building on a 6.3% gain the previous day. Brent crude climbed 5.8% to $82.14 per barrel, reaching its highest level since July 2024. Gasoline prices increased 11 cents to $3.11 a gallon.
“That the current war may be ‘inflationary’ is what’s panicking traders today,” Thierry Wizman, global FX and rates strategist at Macquarie Group, wrote in a note.
He added that earlier assumptions of a limited conflict are now in doubt.
“The view of a short war been upended today because of suggestions from the US administration that the war may be prosecuted for longer than a few weeks.”
Natural gas markets surged as well. European natural gas futures jumped 20% after soaring 38% Monday. In the US, natural gas futures advanced 6%, following a 3.5% rise a day earlier. Diesel prices outpaced those moves domestically, with futures climbing 12% Tuesday after nearly a 12% gain on Monday.
Currency and bond markets signaled shifting expectations around inflation and interest rates. The US dollar index gained 0.8% and is up 1.6% for the week, as traders weighed whether higher energy prices could delay Federal Reserve rate cuts. The 10-year Treasury yield rose as investors sold bonds and assessed the inflationary impact of higher oil prices.
Gold, often considered a refuge during turmoil, fell 4.25%, reversing Monday’s 1.2% climb to a one-month high, underscoring the sharp and uneven swings gripping financial markets.
Moumita Basuroychowdhury is a Contributing Reporter at The National Digest. After earning an economics degree at Cornell University, she moved to NYC to pursue her MFA in creative writing. She enjoys reporting on science, business and culture news. You can reach her at moumita.b@thenationaldigest.com.
