Trading floors in London, New York, Tokyo, and Frankfurt witnessed frantic activity this week as the Iran conflict drove oil past $90 a barrel and triggered a multi-market meltdown that spanned equities, bonds, currencies, and commodities simultaneously. The more than 25% weekly surge in Brent crude — the biggest since the early Covid-19 pandemic — created a volatile trading environment that caught many market participants off-guard by the speed and scale of the moves.
The first and most dramatic move was in crude oil itself, where prices raced from $72.50 to $91.89 in a matter of days. The trigger was the conflict’s disruption of tanker traffic through the Strait of Hormuz, amplified by Kuwait’s announcement of production cuts at storage-full fields. Energy traders who had been positioned for a relatively stable market were forced to rapidly cover short positions, adding momentum to the upside move.
The oil surge then cascaded into other markets. Inflation-linked bonds and breakeven rates surged as the inflationary implications of $91 oil became clear. Government bond yields jumped sharply, with UK five-and ten-year yields recording their biggest weekly move since the Liz Truss mini-budget crisis of 2022. Equity markets repriced lower, with airlines, manufacturers, and consumer discretionary stocks among the biggest losers.
Currency markets joined the volatility, with the US dollar strengthening as the energy shock hit oil-importing economies harder than the US. Emerging market currencies came under particular pressure, as the combination of higher oil prices and a stronger dollar raised the cost of energy imports in local currency terms. Gold, usually a haven in such conditions, fell about 3.5% during the week — an unusual move that suggested investor preference for cash and dollars.
For traders attempting to navigate the meltdown, the challenge was compounded by the uncertainty around the conflict’s duration and the pace of the Gulf storage crisis. Qatar’s energy minister’s warning of oil at $150 added an extreme upside scenario to the price distribution that made risk management exceptionally difficult. The multi-market meltdown of the past week has been one of the most challenging trading environments of recent years, and the next few weeks are unlikely to be much easier.