Global oil prices surged and equity markets tumbled Monday as Iran’s declaration that it has closed the Strait of Hormuz sent shockwaves through financial markets, raising fears of a prolonged energy crisis and reigniting inflation concerns worldwide.

U.S. crude oil rose 8.4%, or $5.72, to $72.74 per barrel, extending gains after the official market close on a new report that Iran said it had closed the Strait of Hormuz. Global benchmark Brent jumped 9%, or $6.65, to $79.45.

A commander in Iran’s Revolutionary Guard Corps said on Monday that the strait was “closed” and that any vessel attempting to pass through the waterway would be set “ablaze.” At least five tankers have been damaged, two personnel killed and about 150 ships stranded around the strait.

Tanker traffic through the strait has come essentially to a stop after Iran declared the strait closed following attacks on Iran by the U.S. and Israel. About 20% of global oil consumption passes through the Strait of Hormuz.

Tanker traffic through the Strait has already come to a halt as shipping companies take precautionary measures, according to consulting firm Rystad Energy. “Nothing seems to be going through at the moment – tankers are definitely spooked,” said Matt Smith, oil analyst at energy consulting firm Kpler.

More than 14 million barrels per day passed through the Strait on average in 2025, or about a third of the world’s total seaborne crude exports, according to Kpler data. About three-quarters of those exports go to China, India, Japan and South Korea.

Asia-Pacific stock markets tumbled Monday as the conflict between Iran and U.S.-Israel escalates. Japan’s Nikkei 225 fell 1.2%, paring some earlier losses, while the Topix dropped 1.34%. Hong Kong’s Hang Seng index opened 1.15% lower, while mainland China’s CSI 300 was down 0.25%. Australia’s S&P/ASX 200 fell 0.48%.

Futures for the S&P 500 and Dow Jones Industrial Average each sank about 1%. The Dow Jones Industrial Average dropped 490 points, and the Nasdaq composite fell 0.9%.

The Cboe Volatility Index, an S&P 500 options-based measure that gauges how traders feel about market conditions over the next 30 days, surged 18% in early action.

At the same time, spot gold prices accelerated more than 2%, pushing the yellow metal and traditional inflation hedge to near $5,400 an ounce.

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Brent could hit $100 per barrel as the security situation in the Middle East spirals, Barclays analysts told clients in a Saturday note. It is even possible that the market is looking at a material disruption that sends Brent spot prices above $120 per barrel, the UBS analyst told their clients.

Wells Fargo strategists mapped out a sharp downside for equities if the Middle East conflict triggers a sustained energy shock. “In the event of prolonged Hormuz closure and an oil shock to $100+ per barrel, we forecast 6000 on the S&P 500 as the worst-case scenario,” the bank wrote. The level of 6,000 indicates a near 13% decline from Friday’s close of 6,878.88.

European natural gas markets have surged more than 20%. After recent investments in LNG terminals, the U.S. is the world’s largest exporter of LNG. Higher prices boost companies that send natural gas overseas, but contribute to rising electricity costs in the U.S.

“We have not seen anything like this in pretty much the history of the Strait of Hormuz,” says Claudio Galimberti, the chief economist at the research firm Rystad Energy. He compares it to blocking the aorta in a circulatory system.

Defense and energy stocks bucked the broader market decline. Lockheed Martin shares also gained 6%, while Northrop Grumman was up 5%. Drone maker AeroVironment jumped more than 10%. Exxon Mobil and Chevron shares gained about 4%, while ConocoPhillips was also up more than 5%.

OPEC+ met and agreed on a production increase that is even larger than expected. In a normal market, that would be expected to push prices down. But right now, all eyes are on Iran.

“The lion’s share of OPEC barrels in the region could essentially become stranded assets in an extended war scenario,” energy analyst Helima Croft of the bank RBC wrote in a research note. “In fact, Iraq might have to ‘shut in’ production — stop making oil from its fields — if it can’t access the Strait of Hormuz to export the barrels it makes”.

The oil shock threatens to derail the Federal Reserve’s inflation-fighting efforts and could trigger a global recession if disruptions persist, with higher fuel costs cascading through supply chains and consumer prices worldwide.