Global stock markets fell sharply on Monday as oil prices increased following President Donald Trump’s 48-hour ultimatum to Iran to reopen the Strait of Hormuz, threatening to destroy Iranian energy infrastructure. The strait, a critical chokepoint for roughly one-fifth of global oil and gas shipments, has been effectively closed amid escalating tensions in the Middle East.
Trump’s warning, posted on Truth Social, demanded Iran fully reopen the waterway by 23:44 GMT Monday or face military action targeting power plants. This ultimatum follows his recent indications of possibly winding down operations and his dismissal of a ceasefire, claiming the U.S. holds the upper hand. Iran retaliated by stating the strait would be “completely closed” if attacked, with powerful parliamentary speaker Mohammad Bagher Ghalibaf threatening irreversible damage to regional infrastructure that could keep oil prices elevated for an extended period.
The conflict, now in its fourth week, includes Israel’s expanded ground operations in Lebanon against Hezbollah, with Israeli officials forecasting weeks of additional fighting against Iran and its allies. This prolonged instability has heightened concerns about global energy security and economic stability.
Fatih Birol, executive director of the International Energy Agency, warned of the worst energy crisis in decades, stating the world economy faces a “major threat.” “No country will be immune to the effects of this crisis if it continues to go in this direction,” Birol said, urging international efforts to resolve the situation.
Market reactions were widespread. Major Asian indexes declined: Tokyo’s Nikkei 225 fell 3.4% to 51,582.23, Hong Kong’s Hang Seng dropped 3.3% to 24,435.74, and Shanghai’s Composite lost 2.3% to 3,867.51. South Korea’s won weakened to 1,510 per dollar, its lowest level since 2009. Oil prices edged higher, with Brent crude at $112.68 and West Texas Intermediate at $98.95 per barrel. In contrast, gold prices plunged to around $4,350 per ounce after eight straight days of losses, their worst weekly decline since 1983, as investors braced for interest rate hikes by central banks aiming to curb inflation from rising energy costs. The Reserve Bank of Australia’s recent rate increase reflects this trend.
Analysts stress the importance of the deadline set by Trump. Chris Weston of Pepperstone noted that while the president has previously stepped back from brinkmanship, he has also followed through on threats when demands are unmet, so markets are taking his post seriously. After the deadline, focus will shift to the scale of any U.S. action and Iran’s response, particularly regarding U.S. bases and regional allies.
The convergence of geopolitical risk, energy supply disruption, and tightening monetary policy poses significant threats to global growth. With the IEA emphasizing the urgency, the approaching deadline marks a pivotal moment that could further destabilize markets and economies worldwide.
