What happened
US crude oil topped $115 a barrel on Monday after overnight US strikes on Iran’s Kharg Island, the country’s primary oil export hub. Stock markets retreated, with the S&P 500 halting a four-day advance.
Crude prices have nearly doubled over the past month. The Strait of Hormuz, through which roughly 20 per cent of global oil passes, remains closed.
Why it matters
The oil price surge is no longer a market event. It is a cost-of-living crisis. American consumers are paying more than $4 a gallon for petrol, airline surcharges are rising, and inflation expectations are climbing. Every week the strait stays closed adds pressure.
Bear market warning
Goldman Sachs strategists warned that sustained disruption to global oil supplies could drag the S&P 500 down to 5,400. That would represent a 22 per cent decline from its January peak of 6,979, meeting the technical definition of a bear market.
The bank’s assessment assumes that diplomatic efforts fail and oil supply remains constrained through the second quarter.
Market reaction
Stocks fell early on Monday as tension mounted ahead of Trump’s Tuesday deadline for Iran. Energy stocks were among the few gainers as oil companies benefit from higher crude prices.
Investors are caught between two risks. A deal would likely crash oil prices and energy stocks. No deal means broader economic pain, potential recession, and deeper equity losses.
What happens next
Trump’s 8pm ET Tuesday deadline is the next catalyst. Markets are pricing in volatility regardless of the outcome. The Federal Reserve has not signalled any intention to intervene on rates, leaving markets to absorb the shock without a monetary policy cushion.