Global financial markets opened under significant pressure on Thursday as escalating geopolitical tensions in the Middle East sent oil prices soaring above $100 a barrel, triggering a broad sell-off in Asian equities and dampening risk appetite across asset classes, including cryptocurrencies.
The immediate catalyst was a series of attacks on shipping in the Gulf region. Reports indicated two fuel tankers in Iraqi waters were struck by explosive-laden Iranian boats, leading Iraqi officials to halt operations at the country's oil ports. As a precaution, Oman also evacuated vessels from its key oil export terminal at Mina Al Fahal. This sent Brent crude prices surging approximately 8.72% to $100 per barrel, with US crude futures climbing to $94.05.
This energy shock revived fears of persistent inflation and tighter monetary policy. The spike overshadowed a coordinated effort by the International Energy Agency (IEA) to release a record 400 million barrels of oil from emergency reserves, with the United States contributing 172 million barrels starting next week. Bond markets reflected growing inflation concerns, with yields on 10-year US Treasury notes rising to 4.2472%. Traders subsequently reduced their expectations for Federal Reserve interest rate cuts this year.
Equity markets reacted negatively. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.54%, Japan's Nikkei dropped 1.59%, and Hong Kong's Hang Seng slid 1.2%. Futures pointed to further global weakness, with S&P 500 and Nasdaq futures each down around 1%.
In a separate development adding to market uncertainty, the United States initiated a new trade investigation. US Trade Representative Jamieson Greer announced a Section 301 probe into several major trading partners, including China, the European Union, India, Japan, South Korea, and Mexico. The investigation, which follows a Supreme Court ruling that struck down part of former President Donald Trump's earlier tariff policy, could lead to new tariffs if unfair trade practices are found. "The United States will no longer sacrifice its industrial base to other countries that may be exporting their problems with excess capacity and production to us," Greer stated.
Cryptocurrency markets weakened in the risk-off environment. Bitcoin, which had briefly risen above $71,000 the previous day, fell to approximately $69,500, erasing its weekly gains and appearing almost unchanged over 24 hours. The broader market followed, with Ether dropping to around $2,026, Solana falling to $84.98, and XRP declining to $1.36. Analysts noted that the recent pattern has seen Bitcoin rallies quickly reversed by geopolitical developments.
Amid the market turmoil, there was a minor update on crypto regulation. US lawmakers were noted to be working to revive the stalled crypto CLARITY Act, with debates specifically focusing on rules for stablecoin yields.
