Renewed geopolitical upheaval in the Middle East sent shockwaves through global financial markets on Wednesday, after U.S. President Donald Trump announced that a temporary ceasefire with Iran had ended, reigniting investor fears over disrupted energy supplies. The resurgence of tensions traces back to recent Iranian attacks on commercial vessels transiting the Strait of Hormuz, the world’s most critical chokepoint for global oil shipping, which prompted the U.S. to launch new extensive strikes against Iranian targets this week. Washington also moved to revoke a temporary sanctions waiver that had allowed limited exports of Iranian crude, further tightening global energy supplies.
Speaking to reporters on the sidelines of a NATO summit held in Turkey, Trump confirmed the ceasefire was “over” while stopping short of ruling out future diplomatic negotiations. The announcement immediately upended market sentiment that had stabilized in recent days, when oil prices had drifted back down to pre-conflict levels following a period of earlier volatility.
By mid-trading on Wednesday, global energy prices had posted sharp double-digit percentage jumps from their previous closes. The international benchmark Brent North Sea crude climbed more than 5% to peak near $78 per barrel, while U.S. West Texas Intermediate crude also gained 4.6% to settle around $73.65 a barrel. Both benchmarks pulled back slightly in afternoon trading, but still held onto most of their daily gains by the 1350 GMT reporting cutoff.
The spike in geopolitical risk triggered a broad sell-off across equities markets worldwide. On Wall Street, the Dow Jones Industrial Average fell 1.0% to 52,412.15 in early midday trading, while the broad S&P 500 dropped 0.5% and the tech-heavy Nasdaq Composite declined 0.3%. “Trump triggered a sell-off,” noted Sam Stovall, chief market analyst at CFRA Research, summarizing the immediate market reaction.
European markets saw even steeper losses: 90 minutes before closing, France’s CAC 40 and Germany’s DAX were both down 1.8%, while London’s FTSE 100 had shed 1.2%. Asian equities closed the trading day deep in negative territory as well, compounded by existing investor concerns over overinflated valuations and excessive capital spending in the AI technology sector. South Korea’s Kospi, which has been the leading benchmark for the regional AI-driven tech rally, plummeted 5.4% to close at 7,246.79 — falling more than 20% below its record high set just one month prior. Tech giants Samsung and SK hynix both dropped around 6% on Wednesday, extending steep losses from the previous session even after Samsung projected a roughly 19-fold year-on-year jump in second-quarter operating profit fueled by strong AI chip demand.
“Investors have been spooked in recent weeks by fears of excessive spending in the AI world and rich valuations in parts of the tech space, causing widespread profit-taking,” explained Dan Coatsworth, head of markets at British investment firm AJ Bell.
Market analysts warn that the return of open conflict in the Middle East could have long-lasting spillover effects for the global economy. “Geopolitical risks are rising for markets,” said Kathleen Brooks, research director at global trading group XTB. Fawad Razaqzada, a senior market analyst at Forex.com, framed the renewed tensions as an unwelcome development for market participants heading into the summer holiday period. “After a long and eventful first half of the year dominated by the US-Israel war on Iran and Trump’s constant flip-flopping, the last thing investors, and frankly anyone else, needed was a return of the same geopolitical environment,” he said. “Unfortunately, it looks like we could be heading back to that.”
Brooks added that a further escalation that blocks the Strait of Hormuz would send prices even higher: “For the Brent crude oil price to extend gains above $80 per barrel, we would need to see another US naval blockade of the Strait of Hormuz, which would stop Iran from selling its oil and cause a major escalation in tensions.”
The U.S. dollar posted modest gains against most major global currencies on Wednesday, as investors priced in the risk that sustained higher oil prices will keep global inflation elevated longer than previously projected. That outcome would put additional pressure on the U.S. Federal Reserve to implement further interest rate hikes to cool price growth, which typically supports dollar valuations. By 1350 GMT, the dollar rose to 162.49 Japanese yen from 162.09 yen the previous day, while the euro fell to $1.1399 from $1.1415 against the greenback.