Middle East conflict escalates; oil tops $115 as Asian markets open sharply lower

Markets reel as oil spikes

A rapid escalation in the Middle East sent Brent crude above $115 a barrel on Monday, pressuring global equities as Asian markets opened sharply lower. Brent rose more than 3% while U.S. WTI climbed to about $102.97, and the MSCI Asia‑Pacific index fell nearly 2%. Tokyo opened down — the Nikkei briefly off about 2.5% and Topix later down more than 4% — while South Korea’s market plunged roughly 5% at the open; U.S. futures traded near 1% lower, extending last week’s heavy losses on Wall Street.

Flashpoints: Hormuz, Bab al‑Mandeb and hardline rhetoric

The selloff is rooted in a widening conflict that has hit critical chokepoints for energy shipments. It has been reported that Iran rejected a U.S. 15‑point ceasefire proposal, and Iranian parliament speaker Mohammad Bagher Ghalibaf (卡利巴夫) reportedly said Tehran would not accept what he called a humiliating settlement. Houthi forces in Yemen have also reportedly fired ballistic missiles toward Israel and threatened to close the Bab al‑Mandeb strait; the Strait of Hormuz has effectively been treated as closed for about a month, pushing fears of severe supply disruption. It has also been reported that U.S. leaders are weighing high‑risk military options and that President Donald Trump told the Financial Times he wanted to “take” Iranian oil — claims that Western and Chinese state outlets have circulated and that add to geopolitical uncertainty.

Economic fallout and policy implications

Analysts warn the impact could be severe and durable. Macquarie Group warned oil could reach $200 a barrel if fighting drags into June and Hormuz remains closed, and one team put the chance of a prolonged conflict into the region’s second quarter at roughly 40%. Higher energy costs are already feeding inflation expectations: rate‑swap markets have pushed back expectations for Fed cuts and some investors are even pricing the prospect of further tightening, while government bonds have been sold and yields have risen. Investors are shifting into perceived safe havens — the dollar has strengthened, aluminum jumped about 5%, and bitcoin slid to three‑week lows around $66,000 — leaving diversified portfolios deeply bruised. How long will central banks and governments tolerate elevated energy prices and the supply‑chain shock that comes with them?