Economy
Stocks sink, oil at multi-month highs after Israel’s strikes on Iran
Global stock markets plunged on Friday while oil prices soared to near multi-month highs after Israel launched a military strike on Iran, triggering Iranian retaliation and fueling a flight to safe-haven assets like gold, the U.S. dollar and the Swiss franc.
The escalation in the Middle East – a major oil-producing region – adds uncertainty to financial markets at a time of heightened pressure on the global economy from U.S. President Donald Trump’s aggressive and erratic trade policies.
Market reaction, which had abated in early European trade, gathered a renewed momentum as the session wore on.
Brent crude oil prices were last up almost 9% at $75.54 per barrel, having jumped as much as 14% during Asian hours. They were set for their biggest one-day jump since 2022, when energy costs spiked after Russia’s invasion of Ukraine.
U.S. oil futures rose almost $6 to $73.91.
Israel claimed it had targeted Iran’s nuclear facilities, ballistic missile factories and military commanders on Friday at the start of what it warned would be a prolonged operation to prevent Tehran from building an atomic weapon, while Iran has promised a harsh response.
Iran had launched about 100 drones toward Israeli territory in retaliation. Washington said it was not involved in the Israeli offensive.
World leaders urged restraint, while Trump urged Iran to make a deal over its nuclear program, saying that there was still time for the country to prevent further conflict with Israel.
Eyes on oil flow
The National Iranian Oil Refining and Distribution Company said oil refining and storage facilities had not been damaged and continued to operate.
The primary concern was whether the latest developments would affect the Strait of Hormuz, said SEB analyst Ole Hvalbye. The key waterway had been at risk of impact from increased regional volatility previously but had not been affected so far, Hvalbye said.
There also was no impact on oil flow in the region so far, he added.
About a fifth of the world’s total oil consumption passes through the strait, or some 18 million to 19 million barrels per day (bpd) of oil, condensate and fuel.
Analysts at consultancy Sparta Commodities said that any significant crude supply disruptions would lead to sour crude grades being marginally priced out of refineries in favor of light sweets.
Under a worst-case scenario, JPMorgan analysts said on Thursday that closing the strait or a retaliatory response from major oil-producing countries in the region could lead to oil prices surging to $120-$130 a barrel, nearly double their current base case forecast.
“The key question now is whether this oil rally will last longer than the weekend or a week – our signal is that there is a lower probability of a full-blown war, and the oil price rally will likely encounter resistance,” said Janiv Shah, analyst at Rystad.
“Fundamentals show nearly all Iranian exports going to China, so Chinese discounted purchases would be most at risk here. OPEC spare capacity can provide the stabilizing force,” he added.
An increase in oil prices would also dampen the outlook for the German economy, the economic institute DIW Berlin said on Friday. It is the only G-7 nation that has recorded no economic growth for two consecutive years.
“The increased uncertainty speaks in favour of a higher risk premium on the oil price, which is why it is unlikely to fall below $70 on a sustained basis for the time being … Fundamental data is taking a back seat in the current situation,” analysts at Commerzbank said in a note.
Safe-haven rush
In other markets, stocks dived and there was a rush to safe havens such as gold and the Swiss franc.
Gold, a classic safe haven at times of global uncertainty, rose 1% to $3,416 per ounce, bringing it close to the record high of $3,500.05 from April.
The rush to safety was matched by a dash out of risk assets. U.S. stock futures fell over 1%, European shares dropped almost 1% and in Asia, major bourses in Japan, South Korea and Hong Kong fell over 1% each.
“Clearly the big question is how far does this go?,” said Chris Scicluna, head of economic research at Daiwa Capital Markets in London, referring to the Middle East tension.
“The market has got it right in terms of stocks down, oil and gold up.”
The developments mean another major geopolitical tail risk has now become a reality at a time when investors are wrestling with major shifts in U.S. economic and trade policies.
“The geopolitical escalation adds another layer of uncertainty to already fragile sentiment,” said Charu Chanana, chief investment strategist at Saxo, adding that crude oil and safe-haven assets will remain on an upward trajectory if tensions continue to intensify.
The Israeli shekel fell almost 1.7% and long-dated dollar bonds for Israel, Egypt and Pakistan slipped.
Two-way pull for bonds
U.S. Treasuries initially benefited from the rush for safer assets, but as the day wore on focus turn to the inflationary impact of oil.
U.S. 10-year Treasury yields were last up 2.6 basis points (bps) at 4.38%, having touched a one-month low of 4.31%. Bond yields move inversely to prices.
“This is a flight-to-safety event. But markets are struggling a bit and in the fixed income space you have an oil-price shock that is inflationary and so you should see markets expecting an even more hawkish Fed,” said James Rossiter, head of global macro strategy at TD Securities.
“On the other hand, you have the flight-to-safety, which should push bond yields lower.”
Germany’s 10-year bond yield touched its lowest level since early March at around 2.42%, before also moving higher.
Daiwa’s Scicluna said a further push higher in oil prices could dampen expectations for central bank rate cuts.
“The ultimate response in bond markets to geopolitics is going to depend on how sharp the rise in energy prices is going to be,” he said.
Some traders were attracted to the dollar as a haven, with the dollar index up 0.8% to 98.50, retracing most of Thursday’s sizable decline.
The Swiss franc briefly touched its strongest level against the dollar since April 21, before trading 0.5% lower at around 0.8144 per dollar.
Fellow safe haven the Japanese yen fell 0.6% to 144.33 per dollar, giving up earlier gains of 0.3%.
The euro was down 0.8% at $1.15, after rising on Thursday to the highest since October 2021.
“Traders are now on edge over the prospects of a full-blown Middle East conflict,” said Matt Simpson, a senior market analyst at City Index.
“That will keep uncertainty high and volatility elevated.”
Panama Canal Administrator Ricaurte Vásquez said Thursday that the conflict in the Middle East and rising fuel costs could ultimately benefit the interoceanic waterway as global shippers adjust routes.
In an interview with The Associated Press (AP), Vásquez said that higher energy, fuel and navigation costs could make the Panama Canal a more attractive option for commercial traffic.
“When costs increase, in general when the price of marine fuel rises, the Panama Canal becomes a more attractive route,” Vásquez said.
Oil prices have risen amid the war in the Middle East, which has led to the temporary closure of the Strait of Hormuz by Iran in response to U.S. and Israeli attacks. About one-fifth of the world’s oil passes through the waterway at the mouth of the Persian Gulf.
If higher energy costs persist, routing cargo through Panama can cut voyages by between three and 15 days, depending on the route, while reducing fuel consumption, he said.
Vásquez said higher fuel costs are expected to affect container ships, bulk carriers and tankers transporting liquefied natural gas. If Middle Eastern supplies are disrupted, shipments may be replaced by other sources, including the United States, which could redirect some LNG cargo from Europe to Asia via Panama.
Gerardo Bósquez, an executive with the Panama Maritime Chamber, said a prolonged conflict could reshape global trade routes, with gas transport among the segments likely to benefit.
Vásquez cautioned that any changes will not be immediate and will depend on how long cargo operators expect the conflict and instability in the Gulf last.
Türkiye’s exports to Spain rose 4.1% year-on-year in the first two months of 2026, reaching $1.6 billion and marking the highest January-February performance on record.
Growing trade between the two countries comes at a time when uncertainty is rising in global commerce, partly driven by protectionist steps taken by the United States.
U.S. President Donald Trump’s country-specific tariff rates were ruled unlawful by the Supreme Court, prompting Washington to pursue alternative measures.
Trump later signed a decision under the Trade Act of 1974 introducing a 10% global tariff on imports from all countries. The U.S. president subsequently announced plans to increase the rate to 15%.
Amid these developments, Türkiye’s trade ties with nearby countries have drawn attention, with improving relations between Ankara and Madrid also reflected in stronger bilateral commerce.
According to data from the Turkish Exporters Assembly (TIM), Türkiye’s exports to Spain increased to $1.604 billion in January-February, up from $1.540 billion in the same period last year.
Spain ranked as Türkiye’s fifth-largest export market during the period, accounting for about 4% of the country’s total exports.
By sector, the automotive industry led exports to Spain with $566.7 million.
It was followed by ready-to-wear and apparel at $257.3 million, chemicals and chemical products at $208.9 million, electrical and electronics at $96.1 million, and iron and non-ferrous metals at $93.5 million.
The largest increases in export value were recorded in iron and non-ferrous metals with $29.4 million, followed by automotive with $25.4 million, ready-to-wear and apparel with $14.1 million, electrical and electronics with $8.8 million, and chemicals and chemical products with $6 million.
Türkiye’s current account balance logged a net deficit of $6.8 billion (TL 299.98 billion) in January, according to the official data released by the Central Bank of the Republic of Türkiye (CBRT) on Thursday.
The current account balance excluding gold and energy indicated a net deficit of $1.23 billion, the bank added.
Goods recorded a deficit of $6.98 billion while services saw a net surplus of $2.6 billion in January.
According to annualized data, the current account deficit recorded as $32.9 billion in January, while the goods deficit was at $71.2 billion, the CBRT also said.
Commenting on the data, Türkiye’s finance chief suggested the current account deficit in 2026 may exceed the government’s projections due to rising energy prices amid geopolitical tensions.
“We assess that this increase will be manageable, thanks to our strengthening macroeconomic fundamentals,” Treasury and Finance Minister Mehmet Şimşek said in a statement on X.
The U.S. announced new probes Wednesday into what it considers unfair trade practices by dozens of countries, including the European Union and China, opening the door to penalties and potentially more levies as U.S. President Donald Trump seeks to replace duties struck down by the Supreme Court.
The Trump administration is launching separate probes centered on overproduction and importing goods made with forced labor, U.S. Trade Representative Jamieson Greer told reporters.
The excess industrial capacity probe targets the European Union, China, Japan, India and others, and could inflame tensions with those trading partners.
Many of those targeted have struck tariff pacts with Washington, which Greer said are “independent” of the investigations.
He said Trump’s trade policy remains the same as it has been “for decades,” even if his tools may change.
“We need to protect American jobs, and we need to make sure we have fair trade with our trading partners,” he added. “If we need to impose tariffs to help solve this, we will.”
Others subject to the excess capacity probe initiated on Wednesday include Singapore, Switzerland, South Korea, Vietnam, Taiwan and Mexico.
The investigation “will focus on economies that we have evidence appear to exhibit structural excess capacity and production in various manufacturing sectors,” Greer said.
He did not specify if the eventual penalties would differ based on the country.
The second probe linked to forced labor will likely be launched “no earlier than tomorrow afternoon” and impact roughly 60 partners, he said.
“This is not about domestic conditions of particular countries,” Greer added.
“It is really about whether countries have implemented external-facing laws to prohibit the import of goods made with forced labor.”
More to come
The efforts come weeks after the high court struck down Trump’s global tariffs, saying he had exceeded his authority in tapping emergency economic powers to impose them on virtually all countries.
Trump swiftly slapped a new 10% duty on imports, to last until July 24, while officials work on more durable measures as they resurrect his trade agenda.
Greer expects other similar investigations “on a country-specific basis” to come.
He seeks to conclude the latest probes “as quickly as possible,” ideally before the temporary duties expire.
Both investigations unveiled on Wednesday are handled by the U.S. Trade Representative (USTR), falling under Section 301 of the Trade Act of 1974.
This is the same authority Trump tapped to impose tariffs on Chinese imports during his first presidency, and many of the resulting duties remain intact.
Trump’s sector-specific tariffs on goods like steel, aluminum and autos, however, remain unaffected by the Supreme Court’s ruling.
Greer said it is too early to say how any new penalties from the latest probes will overlap with the sectoral duties.
Asked how the new investigations could interact with deals that Trump has reached with partners like the EU and Japan, Greer maintained: “I think that we are able to take into account these agreements.”
While he did not go into detail on what future investigations could focus on, he noted that Washington has concerns on issues ranging from digital services taxes to pharmaceutical pricing.
The Trump administration’s latest move also comes ahead of an expected meeting between Trump and Chinese leader Xi Jinping in Beijing in April.
The Turkish central bank put its easing cycle on pause and left its key interest rate on hold at 37% on Thursday, taking a more cautious stance on monetary policy due to market fallout from the Iran war.
“As uncertainty heightened amid geopolitical developments, the global risk appetite deteriorated and energy prices increased,” the bank said, adding it acted to “contain the risks posed by these factors to the inflation outlook.”
The Central Bank of the Republic of Türkiye (CBRT) also left unchanged its band of overnight lending and borrowing rates at 40% and 35.5%, respectively. Last week, it responded to the volatility by taking liquidity measures that lifted overnight rates to around 40%, up 300 basis points from pre-war levels.
“The underlying trend of inflation was essentially flat in February. As uncertainty heightened amid geopolitical developments, global risk appetite deteriorated and energy prices increased. To contain the risks posed by these factors to the inflation outlook, decisions supporting tight monetary policy have been enacted alongside coordinated fiscal measures,” the bank said in a statement following its widely anticipated Monetary Policy Committee (MPC) meeting.
Most polls indicated that the bank was likely to keep rates steady in light of recent developments and escalating regional conflict.
“The effects of geopolitical developments on the inflation outlook through the cost channel and economic activity are being closely monitored,” the CBRT said.
Annual inflation rose slightly to 31.5% in February, while the monthly figure cooled to 2.96%, compared to the higher-than-expected 4.84% increase in January, official data revealed earlier this month.
Before the expanding regional conflict began shifting expectations, the central bank had been expected to continue a rate-cutting cycle that began in late 2024. A year ago, the bank temporarily reversed course and hiked rates, though it returned to rate cuts by mid-2025.
Since the U.S.-Israeli attack on Iran nearly two weeks ago, exports from major Gulf oil producers have largely halted, causing a sharp rise in energy prices and stoking inflation concerns worldwide.
The lira was flat at 44.114 against the U.S. dollar after the announcement.
The bank, meanwhile, also reiterated that a tight stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate, and expectation channels.”
“The committee will determine the policy rate by taking into account realized and expected inflation and its underlying trend in a way to ensure the tightness required by the projected disinflation path in line with the interim targets,” it added. It also again emphasized that monetary policy decisions are made prudently on a meeting-by-meeting basis with a focus on the inflation outlook.
“In case of a significant and persistent deterioration in the inflation outlook, which can also be driven by the recent developments, the monetary policy stance will be tightened,” it suggested.
“In case of unanticipated developments in credit and deposit markets, the monetary transmission mechanism will be supported via additional macroprudential measures. Liquidity conditions will continue to be closely monitored, and liquidity management tools will continue to be used effectively.”
With production across Gulf countries halted and gas prices climbing, the war in Iran and the wider Middle East is disrupting fertilizer supplies and raising concerns over global food security.
A third of fertilizer shipped by sea comes from the region and cannot make it to the global market as Iran has effectively closed the Strait of Hormuz.
That has sent global fertilizer prices soaring, with the U.N. expressing concern in particular about the impact on developing countries.
Gulf as key manufacturer
Natural gas is a key feedstock to make artificial fertilizers, and with its ample gas supplies, the Gulf region has become a key manufacturer.
The region produces nearly half of the sulphur sold worldwide and a third of urea, “the most widely traded fertilizer of all,” said Sarah Marlow, global editor for fertilizers at Argus Media.
It also produces a quarter of globally traded ammonia, another feedstock for fertilizer production, she said.
Major food-producing nations like the U.S. and Australia source much of their urea and phosphate from the Gulf nations.
Brazil, the world’s leading soybean producer, imports most of its urea from Qatar and Iran, which also exports to Türkiye and Mexico.
India relies upon Saudi phosphate.
Asia, in particularly dependent on the Gulf: it imports 64% of its ammonia and more than 50% of its sulphur and phosphates from the region, according to 2024 figures from Kpler.
But since the start of the conflict, which has seen Iran launch retaliatory strikes against its Gulf neighbors following U.S. and Israeli strikes, production has had to be shut down at fertilizer production facilities, particularly in Qatar.
And the Strait of Hormuz remains largely unnavigable.
A Chinese vessel loaded with sulphur was able to leave on March 7, but around 20 other ships were still waiting as of the middle of the week, according to Kpler, which tracks commodity flows.
Global repercussions
While Europe appears at first blush to be less exposed, sourcing just 11% of its urea from the region, it will likely be impacted indirectly.
Morocco is a big supplier of phosphorus-based fertilizers to Europe, but is dependent on the Gulf for sulphur used in their manufacturing.
The EU also imports 26% of its urea from Egypt, but the country is confronted by a halt of natural gas supplies from Israel by pipeline, pointed out Argus Media consultant Arthur Portier.
“Egyptian urea has gone from $500 per ton at the start of the war to more than $650. There is a direct impact on the price of fertilizer,” for European farmers, he said.
Other countries that source their gas from the Middle East to produce fertilizers, such as India, have had to ration supplies to their factories.
Bangladesh has temporarily shut down five out of six of them.
The U.N. expressed concern this week about access to fertilizers in some of the poorest countries.
Crop production at risk
Artificial fertilizers provide nitrogen, phosphorus and potassium necessary for crop growth.
For nitrogen-based fertilizers such as urea, ammonium nitrate and potassium, “global demand never ceases to increase, driven by Asia,” said Sylvain Pellerin at INREA, a French agricultural research institute.
INREA models that without these three key fertilizer inputs, global crop production would fall by a third.
But nitrogen fertilizers require natural gas for their chemical synthesis, and a lot of energy.
As for sulfur, it is a co-product of the oil and gas industry.
“Where there is gas, you will find urea and ammonia,” said the Argus’s Marlow.
Production of phosphorus-based fertilizers starts with phosphate rock, of which Saudi Arabia supplies 20% of the world’s total, but currently it is unable to ship it.
Uncertain outlook
In addition to the uncertainty about how long the war will last, the other question is the amount of damage that fertilizer production facilities will suffer from the fighting.
Repairs and reconstruction of facilities could considerably delay a return to normality once the fighting ends.
While the immediate needs of farmers are more or less covered, there are questions about the sowing season in the southern hemisphere that begins in June.
Portier said the war could be the spark for Europe to develop a fertilizer supply strategy.
Following the surge in fertilizer prices following the Russian invasion of Ukraine, European farmers reduced their consumption and diversified their suppliers.
The European Commission is preparing a fertilizer action plan for this year.
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