LONDON — Global stock markets fell sharply on Monday as oil prices spiked amid persistent fears of prolonged supply disruptions from the Middle East conflict.**
Major indexes declined as Brent crude futures climbed more than 2% in early trading, with investors concerned about tight supplies following damage to infrastructure and restricted flows through the Strait of Hormuz. The International Energy Agency has warned that the market faces a significant deficit this year.
In Europe, the STOXX 600 index dropped around 1.5%, with energy shares rising but broader sectors, including technology and consumer goods, under pressure. London's FTSE 100 fell about 1.2%, while Germany's DAX and France's CAC 40 posted similar losses. Asian markets closed lower earlier in the session, with Japan's Nikkei 225 down more than 1% and Hong Kong's Hang Seng declining around 1.8%.
U.S. stock futures pointed to further losses at the open, extending declines seen in the previous session when the S&P 500 fell 1.2%, the Dow Jones Industrial Average dropped 537 points, and the Nasdaq Composite lost 1.5%.
Oil prices rose on ongoing supply concerns tied to the U.S.-Israel conflict with Iran. Brent crude, the global benchmark, traded near $108 per barrel, while West Texas Intermediate was around $104, according to market reports. The IEA reported in mid-May that global oil supply had declined sharply, with losses from Gulf producers exceeding 1 billion barrels cumulatively, leaving inventories depleting at a record pace.
"The market to remain undersupplied through Q3 2026 even if conflict..." the IEA stated in its assessment, though full details on near-term resolution remain unclear.
The disruptions have followed damage to oil infrastructure in Iran and neighboring Gulf countries, with the Strait of Hormuz — a critical chokepoint for about one-fifth of global oil trade — effectively restricted for more than two months. OPEC+ production has also fallen below expectations.
Analysts have noted demand destruction from higher prices and slower economic growth as factors moderating the spike, but volatility persists. The World Bank has warned of potential significant jumps in global energy prices for 2026.
Bond yields rose as investors priced in risks of higher inflation from elevated energy costs. The selloff in equities reflected broader caution, with no immediate signs of de-escalation in the region.
As of Monday afternoon in London, oil prices held gains but remained below recent peaks seen earlier in the conflict. Stock markets continued to trade lower, with trading volumes elevated. Details on the full extent of daily supply losses and any potential diplomatic developments were not immediately available.
Market participants are monitoring upcoming data releases and statements from energy agencies for further indications of inventory levels and production trends.
