War fears erase $1T from U.S. stocks, Hormuz tensions push oil toward $100 risk

Highlights

U.S. stocks lose $1 trillion amid oil fears
Oil infrastructure attacks raise $100 per barrel risk
Fed rate cuts threatened by renewed inflation pressures

The specter of a larger war draws closer

On Tuesday, the U.S. stock market opened sharply lower, erasing nearly $1 trillion in market value. The Dow Jones Industrial Average fell 0.9%, while the S&P 500 and Nasdaq Composite declined by more than 1% amid fears of oil supply disruptions. Israeli and U.S. aircraft launched new strikes on Iran, and retaliatory actions intensified concerns about a prolonged conflict in a region critical to the global energy market.

At least a dozen key oil storage and refining facilities were reportedly targeted in Iranian strikes, including Ras Tanura Refinery (Saudi Arabia), Fujairah Oil Storage Facility, and the Musaffah Fuel Terminal (UAE). Drone attacks also hit QatarEnergy’s gas and oil infrastructure, including the Ras Laffan processing complex and facilities in Mesaieed, leading to a halt in LNG production. Oman’s Port of Duqm sustained damage as well.

China has called for de-escalation and is pressuring Iran to restore shipping through the Strait of Hormuz, though attempts to secure unilateral passage for Chinese vessels have reportedly failed. Meanwhile, Trump ordered the U.S. International Development Finance Corporation (DFC) to provide “very moderately priced” insurance for ships transiting the Persian Gulf, while the U.S. Navy began escorting convoys through high-risk waters.

However, the effectiveness of these measures remains unclear. Energy-producing nations have reportedly halted output as storage facilities fill up. Discussions about a potential ground operation are intensifying, as analysts argue that airstrikes alone may not achieve strategic objectives. Speculation is also growing about Pakistan’s possible involvement, a scenario actively discouraged by China and India. The port of Chabahar, located outside the Strait of Hormuz near Pakistan’s border, is strategically important for oil shipments to India and China. Any attempt by Pakistan to seize it could trigger renewed tensions between two nuclear powers.

Time is money

For markets, the decisive factor is not the escalation itself but the duration of supply disruptions. If interruptions in the Strait of Hormuz persist for several weeks, oil prices could stabilize above $100 per barrel, significantly weakening corporate earnings forecasts in the U.S. and Europe.

In such a scenario, the energy sector would likely emerge as the main beneficiary, while airlines, industrial companies, and consumer-focused businesses face rising costs. Pressure on the S&P 500 and Nasdaq could intensify as higher bond yields and renewed inflation expectations drive another repricing of growth stocks.

A further risk is that surging energy prices could derail the anticipated monetary easing cycle. If inflation accelerates due to higher oil prices, the Federal Reserve may be forced to maintain a restrictive stance longer than markets expect, increasing the probability of a “stagflation-lite” environment — slowing growth combined with persistent inflation.

Capital could then rotate from technology stocks into commodities, the U.S. dollar, and defensive assets, amplifying volatility across global markets in 2026.

Trade policy fades into the background

Amid military escalation, new U.S. global tariffs have receded into the background. However, according to CBS, U.S. officials acknowledged that the temporary import surcharge of up to 15% — introduced by Trump following a Supreme Court decision — can remain in effect for 150 days and cannot be extended unilaterally without Congressional approval.

Legal experts argue that applying this authority globally is unprecedented and was originally intended to address balance-of-payments issues rather than standard trade deficits, as framed by the administration. Therefore, a general merchandise trade deficit alone may not be sufficient grounds for extending the tariffs.

As we wrote, U.S. and Israel attack Iran: Oil prices surge and energy crisis risks rise

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