Watch: Why the Iran war is pushing up oil prices

As turmoil continues in the Middle East, the price of crude oil rose to more than $100 a barrel on Monday.

The economic fallout from the war involving Iran, the U.S., and Israel is escalating rapidly into its second week. Initially limited, the financial impact is now becoming more severe. Oil prices surged dramatically—by 25% overnight, nearing $120 per barrel, before retreating slightly to $107 following news of global reserve releases. This price spike, up 47% from just ten days ago, is stoking inflation fears and threatening consumer spending. Stock markets are reacting negatively; Japan’s Nikkei 225 dropped over 5%, and U.S. futures markets, including the S&P 500, are signaling continued losses. The chance of a U.S. recession has also climbed significantly, up from 24% to 38% on prediction markets. A critical concern is Iran’s threat to block the Strait of Hormuz, a vital route for global oil shipments, and its willingness to attack passing vessels. Former President Trump downplayed the economic costs, asserting the importance of neutralizing Iran’s nuclear capabilities. Nonetheless, high energy costs could politically harm him, just as they did President Biden, despite broader economic resilience demonstrated during the Ukraine conflict.

A weekend of escalating violence in the Middle East intensified concerns around a sustained supply crunch, propelling oil prices to their highest level in four years and triggering a deep stock market sell-off.

U.S. stocks tumbled in early trading on Monday after oil prices topped $100 a barrel over the weekend and the war in Iran showed no signs of abating.

Oil prices have surged past $100 a barrel for the first time since Russia’s invasion of Ukraine, amid the widening fallout of the United States and Israel’s war on Iran.

Following Israeli airstrikes on multiple fuel depots in Tehran, the Iranian capital has been engulfed in a hazardous cloud of toxic smoke, resulting in black acid rain and widespread air pollution. The strikes caused prolonged fires that released noxious fumes, impacting areas miles from the explosion sites. Residents described the air as 'unbreathable,' with many experiencing respiratory issues and skin irritation. Iran's Red Crescent warned the rain was highly acidic and dangerous to human health.