The escalating conflict in the Middle East entered its fourth day on Tuesday, sending shockwaves through global financial markets as widespread shutdowns of oil and gas infrastructure, combined with a near-total halt in shipping through the Strait of Hormuz, fueled fears of prolonged supply disruptions.
The prospect of a prolonged military campaign drove oil and gas prices sharply higher and hit travel stocks, regional equities, and emerging-market bonds.
Israel struck targets in Lebanon following attacks by Hezbollah, while Tehran fired missiles and drones at Israel, the Gulf states, and a British air base in Cyprus. U.S. President Donald Trump said in an interview with the Daily Mail on Sunday that the military campaign against Iran could continue for the next four weeks, reinforcing expectations that tensions may not ease quickly.
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The immediate market response underscored how deeply intertwined global supply chains, energy markets, and financial flows are with stability in the Gulf.
Energy markets surge on supply fears
Crude prices jumped after the conflict shut down oil and gas facilities across parts of the Middle East and disrupted shipping through the Strait of Hormuz, a narrow waterway that carries roughly 20% of global oil supply. The spike in crude lifted major producers, including Exxon Mobil and Shell, which were among the strongest gainers as oil climbed more than 8%.
Piper Sandler analysts said in a note that “potential duration and physical volume impact of the military escalation will keep upward pressure on both commodity price and energy equities, reducing the risk of 2026 oil price weakness.”
Natural gas markets also tightened sharply after Qatar halted production of liquefied natural gas. Qatari LNG accounts for about one-fifth of global supply, making any interruption significant for Europe and Asia, where utilities depend on imports for power generation and heating.
In a further escalation, QatarEnergy announced it would halt additional downstream output. The company said:
“Further to the decision by QatarEnergy to stop production of liquefied natural gas (LNG) and associated products, QatarEnergy is stopping the production of some downstream products in the State of Qatar, including urea, polymers, methanol, aluminum, and other products.
‘QatarEnergy values its relationships with all of its stakeholders and will continue to communicate the latest available information.”
The suspension of urea production has implications for global fertilizer markets, while cuts to methanol and polymers affect petrochemical supply chains used in packaging, automotive components, and construction materials. Aluminum output disruptions could also feed into industrial metals pricing, amplifying cost pressures beyond energy.
U.S.-listed gas-focused firms such as CNX Resources and Williams Companies rose more than 1%, while the United States Natural Gas Fund gained 3.7% as traders recalibrated expectations for tighter global supply.
Airlines and travel stocks retreat
Airline shares fell after key Middle Eastern hubs were closed and oil prices surged, raising concerns about higher jet fuel costs and route disruptions. Stocks including Ryanair, IAG, American Airlines, and United Airlines declined, pulling the S&P 1500 Passenger Airlines index down nearly 3%.
J.P. Morgan analysts said that “prior conflicts have led to an immediate hit in passenger demand to the impacted region,” often combined with an indirect impact on bookings confidence across broader airline networks.
Travel platforms such as Booking Holdings and Expedia Group fell alongside hotel operator Hyatt Hotels. Cruise operators, including Carnival Corporation, also slid. Norwegian Cruise Line Holdings warned of uncertainty around fuel costs this year due to escalating geopolitical tensions.
For airlines, fuel can account for a substantial share of operating expenses. A sustained rise in oil prices not only pressures margins but can also lead to fare increases, potentially weakening discretionary travel demand.
Defense stocks climb on spending outlook
Shares of major U.S. defense contractors advanced as investors anticipated higher military spending and replenishment of weapons stockpiles. Northrop Grumman, General Dynamics, RTX, and Lockheed Martin rose between 1.1% and 3.7% in early trading.
Jefferies analysts said “the strikes or at least the scope of the strikes reinforce the buildup of U.S. defense spending and key initiatives such as Golden Dome and the restocking and ramping of missiles and defensive interceptors.”
European peers, including BAE Systems, Rheinmetall, and Leonardo, also recorded gains as markets factored in sustained security spending across NATO members.
Shipping firms gain as trade routes tighten
Shipping and tanker companies rallied as disruptions to Hormuz and the Suez Canal tightened capacity and lifted expectations for higher freight rates. Danish shipping group Maersk climbed 7.8%, while Germany’s Hapag-Lloyd rose 6.7%. U.S.-listed tanker operator Nordic American Tankers gained more than 3%, with Teekay Tankers and International Seaways also advancing.
Longer voyage routes, higher insurance premiums, and risk surcharges could translate into rising transportation costs for crude and refined products, feeding into global inflation dynamics.
Safe havens strengthen, regional assets weaken
Gold prices rose as investors sought safety, while the U.S. dollar index climbed 0.6%, gaining against the yen, Swiss franc, and euro. J.P. Morgan analysts said a sustained rise in energy prices would likely strengthen the dollar while weighing on currencies of countries that rely heavily on energy imports, particularly in Central and Eastern Europe.
Long-dated dollar-denominated bonds from Qatar, Oman, and Saudi Arabia fell sharply amid concern about further escalation. Equity markets in Qatar and Kuwait posted steep declines. The broader risk-off mood also pressured emerging-market assets, with dollar bonds in Egypt and Turkey among those that declined.
The breadth of the market moves signals that investors are preparing for a scenario in which energy supply disruptions persist and geopolitical risk remains elevated.
No End in Sight
U.S. military leaders confirmed additional forces heading to the region. President Trump told the Daily Mail on Sunday that the campaign could last “four to five weeks, but that it could go on far longer than that.”
Iran’s security chief Ali Larijani posted on X that Tehran has no plans to negotiate with the U.S.
The European Union called for “de-escalation” and “maximum restraint,” emphasizing civilian protection. ECB President Christine Lagarde warned Sunday that the trans-Atlantic business relationship could suffer from trade uncertainty.
The situation remains highly volatile, with potential for both further oil-price spikes and sharp corrections if de-escalation emerges. An extended Strait disruption would push prices higher, force Asia to draw stockpiles, and curtail refinery runs — risking shortages in China and India. Markets are currently pricing in significant risk, with Brent above $82 and alternative supply routes under strain.
With President Trump indicating that operations could continue for weeks, attention is focused on oil flows through the Strait of Hormuz, the status of Gulf energy infrastructure, and the risk of spillover into wider regional trade and financial channels.