Oil prices jump, dollar rallies as conflict grips Middle East

FE Team | Published: March 02, 2026 21:42:31

LONDON/SYDNEY, Mar 02 (Reuters): Oil prices surged, the dollar gained and shares slid on Monday as the Iran conflict widened in the Middle East and looked set to last for weeks, threatening to upend a global economic recovery and perhaps reignite inflation.
Brent crude was last up 8.3 per cent at $78.5 a barrel, though it had briefly topped $82.00 at one stage, while US crude climbed 7.5 per cent to $72.02 per barrel. Safe-haven gold rose 2.1 per cent to $5,389 an ounce .
Israel launched new air strikes targeting Iran and expanded its military campaign to include attacks on Iran-backed Hezbollah militants in Lebanon on Monday, while Tehran fired missiles and drones at Israel, Gulf states and a British air base in far-away Cyprus. US President Donald Trump signalled the US-Israeli military assault on Iranian targets could last four weeks.
Oil and gas facilities were forced to shut down across the Middle East, and Saudi Arabia shut its biggest domestic oil refinery on Monday after a drone strike.
And all eyes were on the Strait of Hormuz, through which around a fifth of the world's seaborne oil trade flows and 20 per cent of its liquefied natural gas. While the vital waterway has not yet been blocked, marine tracking sites showed tankers piling up on either side of the Strait, wary of attacks or maybe unable to get insurance for the voyage.
For investors the crucial question is how long the war, or specifically the disruption to energy markets, will continue.
"Historically markets have mostly shrugged off isolated conflicts in the Middle East. Only when the conflicts have had the potential to draw in the entire region have markets really moved," said Michael Field, chief European equity strategist at Morningstar. "For now, the market will be trying to ascertain how long the conflict will be likely to last and whether it will draw in other nations."
A prolonged spike in oil prices would risk reigniting inflationary pressures globally, while also acting as a tax on business and consumers that could dampen demand.