Oil prices hit 5-month high, Asian markets plunge as Israel-Iran conflict spirals with US entry

June 23, 2025 – Global financial markets are reeling as crude oil prices soar to their highest levels in five months following the United States’ direct military involvement in the escalating conflict between Israel and Iran. The Asian trading session opened to widespread losses, as investor sentiment turned sharply risk-averse, sending shockwaves through major regional indices and commodities alike.

U.S. Strikes Escalate Middle East Tensions

The latest geopolitical tremor came over the weekend, when U.S. forces launched targeted airstrikes on Iranian nuclear facilities in response to intelligence suggesting imminent threats to American assets in the Middle East. The Pentagon confirmed the operations, stating the strikes were “limited, precise, and intended to degrade Iran’s offensive capabilities.”

This marked a significant turning point in the ongoing Israel-Iran hostilities. With the U.S. now visibly on the battlefield, analysts fear the situation could morph into a broader regional war, pulling in other actors and disrupting global trade routes—particularly those critical to the oil industry.

Oil Prices Rocket on Fears of Supply Disruption

Crude oil prices responded instantly. Brent crude spiked over 5% in early trading, briefly crossing $81 per barrel, while West Texas Intermediate (WTI) climbed to $75.30 before settling slightly lower. Both benchmarks are now trading at levels not seen since January.

The price surge reflects mounting fears that Iran might retaliate by targeting oil infrastructure or attempting to block the Strait of Hormuz, a narrow passage that carries nearly a fifth of the world’s oil shipments. While Iran has not yet enforced any closure, its parliament passed a resolution urging the government to consider it as a retaliatory measure. The move is being closely monitored by global powers and shipping authorities alike.

“The Strait of Hormuz is the jugular vein of the global energy market,” said Samantha Clarke, an energy analyst at Meridian Global. “Even the suggestion of its closure sends ripples through the market. If Iran acts on this, oil could easily touch $100–$120 in the short term.”

Asian Markets Nosedive

In Asia, the response was swift and brutal. Investors dumped risk assets and flocked to safe havens like gold and the U.S. dollar. Major indices across the region saw steep losses.

• Hong Kong’s Hang Seng Index fell 1.2%, with oil-sensitive sectors such as airlines, transport, and manufacturing bearing the brunt.
• Tokyo’s Nikkei 225 slipped 0.9%, dragged down by fears that rising energy costs could derail Japan’s fragile economic recovery.
• Shanghai Composite dropped 0.7%, while South Korea’s KOSPI declined by 0.6%.
• Australia’s ASX 200 lost 0.5%, wiping out nearly $25 billion in market capitalization.

Indian markets also suffered heavily. The BSE Sensex plunged more than 800 points intraday, while the Nifty 50 breached the 24,900 mark, ending its weeks-long rally. Analysts cited surging crude prices and inflationary concerns as primary drivers behind the fall.

“India imports over 80% of its crude requirements,” said Rajat Sharma, head of equity research at Vardhan Capital. “A prolonged spike in oil prices directly impacts the trade deficit, weakens the rupee, and inflates fuel costs. This scenario could force the Reserve Bank of India to delay rate cuts, even as inflation continues to simmer.”

Currency and Commodity Markets Also React

The U.S. dollar gained strength as global investors rushed into perceived safe-haven assets. Meanwhile, gold prices rose 1.4%, trading above $2,020 an ounce—its highest since April.

Global bond markets also witnessed a retreat from risk. Yields on 10-year U.S. Treasuries fell as investors sought shelter from market volatility. At the same time, commodity markets experienced turbulence, with natural gas prices rising over 3% and shipping rates for crude tankers soaring amid anticipated disruptions.

OPEC and Global Leaders Monitor Developments

OPEC released a brief statement expressing concern over the “fragile state of regional stability” and warned member countries to prepare contingency plans for possible supply chain interruptions. Meanwhile, energy ministers from several countries are reportedly engaging in backchannel diplomacy to prevent a broader supply crisis.

The United Nations Security Council has called for an emergency session to address the situation, as diplomatic efforts intensify to avoid full-scale regional war. European leaders urged all sides to exercise restraint, warning that further escalation could have “unprecedented consequences” for global energy security.

What’s at Stake?

The stakes are incredibly high. Besides the direct human toll and geopolitical instability, the economic ramifications of a protracted conflict involving Iran, Israel, and the U.S. could be severe.

Global markets are already fragile due to sluggish growth in China, persistent inflation in the West, and shifting monetary policy in major economies. A sustained oil shock could worsen global inflation, squeeze household budgets, delay interest rate cuts, and choke economic recovery in emerging markets.

In the short term, the focus will remain on whether Iran makes good on its threats to retaliate or block the Strait of Hormuz. While some experts believe the actual closure is unlikely due to Iran’s own dependence on oil exports, the risk remains potent enough to keep markets on edge.

Outlook

As of now, the situation remains fluid. While oil traders brace for further volatility, equity markets will likely remain under pressure until geopolitical clarity emerges. Central banks, too, may adopt a wait-and-see approach, holding back on rate changes as they assess the inflationary impact of rising oil.

For now, one thing is certain: the U.S. entry into the Israel-Iran conflict has redrawn the geopolitical map, sending tremors across oil markets and financial exchanges worldwide. Investors and policymakers alike are on high alert, with no easy resolution in sight.