Escalating conflict in the Middle East triggered a broad global market sell-off on Wednesday, driving investors toward the safety of the U.S. dollar and sending energy prices surging. The immediate reaction was a decline in stock markets and a shift away from currencies perceived as riskier, notably the euro, amid concerns that prolonged supply disruptions could sustain higher inflation.
Brent crude oil futures rose 1.9% to $82.94 per barrel, reaching its highest level since July 2024 and accumulating a 14% gain since the previous Friday. European gas prices have rocketed 70% since the end of last week. The jump follows military strikes that disrupted energy exports from the Middle East, with retaliatory actions closing key shipping lanes in the Gulf and forcing production halts from Qatar to Iraq. This supply-side shock renewed fears that energy costs could remain elevated, feeding into broader consumer prices.
The euro weakened for a third consecutive day, slipping 0.2% to $1.1590, its lowest since late November. The move accelerated after data on Tuesday revealed unexpectedly high eurozone inflation for February, preceding the latest conflict. The combination of lingering price pressures and geopolitical uncertainty enhanced the dollar’s appeal as a haven. The U.S. dollar index, which measures the greenback against a basket of six major currencies, edged up 0.1% to 99.208, touching its strongest level since November 28.
Other major currencies also fluctuated. The British pound fell 0.3% to $1.3323. Against the Japanese yen, the dollar dipped 0.2% to 157.52. The offshore yuan weakened to 6.9287 per dollar, pressured by diverging Chinese economic data: official PMI figures showed a slump in activity while a private-sector survey exceeded forecasts. The Australian dollar dropped 0.6% to $0.6996 despite stronger-than-expected GDP growth for the fourth quarter, highlighting the dollar’s broad-based strength. The New Zealand dollar inched up 0.1% to $0.5898. In cryptocurrencies, Bitcoin fell 0.4% to $67,776.69 and ether declined 0.5% to $1,958.81.
The day’s trading underscored how swiftly geopolitical events can reverberate through financial markets, particularly via the energy sector. The sharp rise in oil and gas prices directly challenges the narrative of easing inflation, potentially forcing central banks to maintain higher interest rates for longer. This environment of heightened volatility and rising costs is expected to shape investor strategies and economic policy discussions in the coming weeks as markets assess the duration and scale of the supply disruptions.
