Oil prices soared and global markets fell sharply on Friday as tensions between Israel and Iran intensified, prompting fears of a broader Middle East conflict that could disrupt global energy supplies.
U.S. oil surged 7.26%, closing at approximately $72.98 per barrel, while Brent crude gained 7%, settling at $74.23 per barrel. Earlier in the day, prices spiked as much as 14%, marking the biggest single-day jump since March 2022, following Russia’s full-scale invasion of Ukraine.
The oil benchmarks also posted their largest weekly gains since October 2022, signaling mounting concern among investors. 
Ahmad Assiri, a strategist at Pepperstone, noted the market reaction reflects both “immediate supply concerns” and the risk that “negative headlines could extend the timeline for escalation,” unlike past Israel-Iran flare-ups.
Stock Markets Fall, Safe Havens Rise
As oil jumped, U.S. stocks tumbled. The Dow Jones dropped 770 points (1.79%), while the S&P 500 fell 1.13% and the Nasdaq Composite slid 1.3%. The S&P snapped a two-week winning streak.
Gold, a traditional safe haven, rose 1.4% to $3,433 per troy ounce, and the U.S. dollar slightly strengthened. Wall Street’s fear gauge (CBOE Volatility Index) surged 19%.
Airlines and Travel Stocks Plunge
Travel-related stocks took a major hit amid geopolitical uncertainty:
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United Airlines (UAL): –4.4%
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Delta (DAL): –3.8%
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American Airlines (AAL): –4.9%
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Expedia (EXPE): –3.5%
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Royal Caribbean (RCL): –2.9%
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Norwegian (NCLH): –5%
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Carnival (CCL): –4.9%
European airlines also saw declines, including EasyJet, IAG, and Lufthansa.
Defense Stocks Rally
Conversely, defense contractors rose as military tensions heightened:
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Lockheed Martin (LMT): +3.7%
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General Dynamics (GD): +1.1%
Israel Strikes Iran, Conflict May Continue
Early Friday, Israel launched a targeted strike on Iran’s nuclear and missile sites, reportedly killing two senior Iranian commanders. Israeli Prime Minister Benjamin Netanyahu said the operation could last “many days,” citing a national security threat.
Iran swiftly retaliated, launching “hundreds of ballistic missiles” at Israeli territory. Iran’s Supreme Leader Ayatollah Ali Khamenei warned of “severe punishment” for Israel’s actions.
U.S. Position and Global Impact
Secretary of State Marco Rubio clarified the U.S. was not involved in Israel’s military actions, warning Iran not to target U.S. assets.
Former President Donald Trump, speaking to The Wall Street Journal, said the attacks were “great for the market” because they prevent Iran from developing nuclear weapons. “It will be the greatest thing ever for the market,” Trump added.
Energy Market Concerns
Analysts worry the conflict could remove Iranian oil from the global market. If that happens, oil prices could jump another $7.50 a barrel, according to Andy Lipow of Lipow Oil Associates.
The Strait of Hormuz, a critical route through which about 20% of global oil passes, is a major chokepoint. Any disruption could push oil to $100 per barrel, Lipow warned.
OPEC and Inflation Worries
OPEC responded to the price spike, stating there is “no need” to release emergency stockpiles. Bob McNally of Rapidan Energy Group said OPEC prefers to “lay low and hope this blows over.”
Analysts at Capital Economics noted rising energy prices could reignite inflation and force central banks like the Federal Reserve to delay interest rate cuts. The Fed is set to meet next week to review economic conditions.
Risks of Broader Conflict
Priyanka Sachdeva of Phillip Nova warned the conflict raises risks of disruption not only from Iran but also other neighboring oil-producing countries. Though Trump has shown reluctance to engage militarily, any U.S. involvement could escalate tensions further, she said.
With Israel’s military campaign underway and Iran vowing retaliation, investors are bracing for continued volatility, elevated oil prices, and potential global economic ripple effects.
