The US-Iran conflict enters its fifth week! Crude oil experiences an epic surge, while stocks, bonds, and precious metals are rarely sold off simultaneously.

As the conflict between the United States, Israel, and Iran has entered its fifth week, international oil prices have risen to their highest levels since 2022, and are set to break historical records for the largest monthly increases. Meanwhile, global other markets are experiencing both extremes of fortune and misfortune. Stocks, bonds, and precious metals are being sold off together—an unusual simultaneous selloff—while liquidity demand is driving the U.S. dollar in a “king’s return.”

Oil sees an epic market move

As of Monday’s close, front-month Brent crude oil futures for May delivery were quoted at $113.39 per barrel. Data from the Dow Jones market shows that the contract has risen 59% since the start of this month, and is expected to record the biggest single-month gains in history in both U.S. dollar terms and percentage terms. Over the same period, May-delivery West Texas Intermediate (WTI) futures rose nearly 52%, and are expected to record the biggest single-month gain in U.S. dollars in history.

Global oil prices rebound again, driven by U.S. President Trump’s threat on Monday that if an agreement to end the war and reopen the Strait of Hormuz trade corridor is not reached as soon as possible, the United States will blow up Iran’s power plants, oil wells, and the oil-export hub at Khark Island.

Since the outbreak of the conflict, Iran has repeatedly threatened attacks on ships that pass through the Strait of Hormuz without its permission. This narrow chokepoint, located between Iran and the Arabian Peninsula, typically accounts for about one-fifth of global oil transportation. Shipping intelligence firm Kpler shows that after the conflict began, the Strait of Hormuz’s daily passage volume dropped by roughly 90% to 95%, leaving hundreds of tankers stranded in the Persian Gulf.

Maritime insurance costs inside the Strait of Hormuz have also surged sharply. Although officials in the Trump administration discussed providing military escorts, the timing and specific implementation remain unclear.

Danielle Huhson, head of financial market analysis at AJ Bell, said: “Trump’s remarks about taking Iran’s oil and the country’s Khark Island export hub, the U.S. troop buildup, and the involvement of the Iran-supported Houthi forces in the war all make it feel like the conflict is escalating rather than coming to an end.” She added that, given the risk that shipping routes outside the Strait of Hormuz may also be disrupted, Brent crude prices are still “firmly in the warning range.”

In a daily report last week, analysts led by Natasha Kanewa at Morgan Stanley wrote that this means fighting has spread beyond the Strait of Hormuz, and that the Red Sea and the Mandeb Strait—key chokepoints for global oil trade—have also been pulled into the picture. “In practice, the two main corridors for global energy trade are both exposed to risk at the same time, alternative routing options are being squeezed, and systemic supply-chain risk is rising.”

Investors have nowhere left to run

As the conflict moves into its fifth week, global financial markets have begun to show signs of severe strain. Stocks, bonds, and gold are all being dumped, and investors have almost no other attractive options besides holding cash to help their portfolios weather this round of storm.

The benchmark yield on the U.S. 10-year Treasury rose as high as 4.43% at one point last Monday. Over the past month, it has climbed cumulatively by about 50 basis points. Correspondingly, expectations for Federal Reserve rate cuts are being gradually absorbed.

Big swings in yields are occurring in an extremely unusual backdrop. Recently, indicators reflecting expected volatility in the Treasury market have surged to their highest level since April of last year. The market’s core concern is that oil prices may remain in the three-digit range for the long term. In fact, as global market pressure has continued to build in March, investors have realized that the U.S.-Iran conflict and the resulting supply-chain disruptions may persist, putting buyers around the world at risk of limited supply of key commodities such as oil, natural gas, and fertilizer.

Precious metals have also been unable to escape the selloff. Since the beginning of this month, COMEX gold futures on the New York Mercantile Exchange have fallen by more than 15% in total, while COMEX silver futures over the same period are down 21%.

Panic sentiment has spread to risk assets. Europe’s three major stock indexes have fallen by more than 6% since March. Japan’s Nikkei 225 index has plunged by more than 12%. In the United States, the three major stock indexes have already closed lower for the fifth consecutive week, marking the longest streak of consecutive declines since May 2022. The Cboe Volatility Index (VIX) closed above 30, which is generally regarded as a level of panic. The index is based on options market trading activity and reflects investors’ expectations for the S&P 500’s volatility over the next roughly one month.

Charlie McEli gote, a cross-asset strategist at Nomura, said that as implied volatility has surged, mature investors such as hedge funds and sovereign wealth funds that have steadily accumulated assets over the past few years have begun to trim their holdings. In recent days, traders have not faced sudden shocks like they did during last April’s tariff panic, but are gradually coming to realize that there is “no such thing as a perfect ‘TACO safe-haven exit.’”

With oil prices surging, the U.S. dollar has continued to strengthen. According to FactSet data, the ICE U.S. Dollar Index—which reflects the dollar’s performance against a basket of currencies—has risen 2.6% so far this month and is on track to record the biggest single-month gain since last July.

Worth noting is that it is not common to see stocks, the bond market, and precious metals all falling at the same time. But Janney Montgomery Scott’s fixed-income chief strategist, Guy Lebas, provided a relatively simple explanation. During an oil shock, investors need to sell all tradable assets to raise cash. “When everyone needs dollars, it often triggers chaos. Energy-importing countries need dollars to compete for scarce and expensive energy resources.”

Senior portfolio manager George Zipoloni lamented: “This month, really, there is nowhere to hide. You can’t buy stocks, you can’t touch bonds, and even credit spreads have started to widen.” He added: “Some energy and chemical companies’ share price performance is still fairly good, but it cannot offset the overall decline in investors’ portfolios. The situation in Iran turns the entire world upside down. If the energy crisis continues for a long time, there will be very bad consequences.”

McEli gote said that over the past two weeks, the market has gradually reached a consensus: damage to global energy supply will be difficult to recover quickly. This is mainly due to Iran’s attacks on the region’s energy infrastructure. Another major concern in the market is that the Federal Reserve may be forced to raise interest rates in the context of an energy supply shock. As equity markets’ actual volatility starts to rise, this could continue to weigh on asset prices for a period of time.

(This article is from First Finance)