Oil futures jump nearly 5% as recent conflict escalates and risk-off trades build
Sticky inflation and tech-led weakness were set to define last week’s selloff — until US and Israeli strikes on Iran killed Supreme Leader Ali Khamenei and pushed oil, war risk, and safe-haven trades to the foreground.
According to CNBC, US equities dropped on Friday after the latest producer price index came in “much hotter than expected,” fuelling concerns about “sticky inflation” and adding to this month’s market turbulence.
The Dow Jones Industrial Average fell 521.28 points, or 1.05 percent, to 48,977.92, while the S&P 500 slipped 0.43 percent to 6,878.88 and the Nasdaq Composite lost 0.92 percent to 22,668.21.
The S&P 500 and Nasdaq finished February in the red, with the Nasdaq down more than 3 percent for its worst month since last March.
CNBC said fears about the impact of artificial intelligence on specific industries and the broader economy weighed on sentiment, compounded by Jack Dorsey’s fintech company Block announcing layoffs of more than 4,000 employees — nearly half its workforce.
Financial stocks and other economically sensitive names pulled back, while stocks linked to private credit sold off on concerns they could suffer from UK mortgage provider Market Financial Solutions’ collapse.
Apollo and Jefferies fell more than 8 percent and 9 percent respectively, and Blue Owl slid about 6 percent after recent liquidity curbs and an asset sale.
Rotation out of software and mega-cap tech added pressure.
Salesforce and Microsoft each dropped more than 2 percent, cybersecurity firm Zscaler sank 12 percent after deferred revenue and billings missed expectations, and CoreWeave fell 18 percent on disappointing guidance.
Nvidia extended a post-earnings slide, losing 4 percent on Friday after a more than 5 percent drop on Thursday.
CNBC said market participants linked the move to doubts around Nvidia’s deal with OpenAI, weak sentiment on the AI trade and skepticism about whether hyperscalers’ lofty AI capital expenditures are sustainable.
The iShares Expanded Tech-Software ETF fell nearly 10 percent in February, leaving it almost 23 percent lower year-to-date.
Macro data added to the unease.
January’s producer price index, a wholesale inflation gauge, rose 0.5 percent for the month versus economists’ expectations of 0.3 percent, while core PPI, excluding food and energy, climbed 0.8 percent against a 0.3 percent forecast.
Stephen Kolano, chief investment officer at Integrated Partners, told CNBC the PPI print adds another complication on top of anxieties about AI capex, disruption risks and stress in private credit.
He said the services-driven reading suggests companies may be starting to pass tariff costs through to end consumers “in order to maintain their margins,” and argued that “inflation isn’t solved yet,” leaving the US Federal Reserve facing a “conundrum” over whether to cut or hold rates.
That backdrop is now being eclipsed by a major geopolitical shock.
Over the weekend, the US and Israel launched what CNBC called their “most aggressive attack ever on Iranian targets,” killing Ayatollah Ali Khamenei and thrusting the region into a widening conflict as Iran retaliated with air strikes across the Middle East.
Iranian state media announced Khamenei’s death early Sunday.
CNBC reported that Iran launched an “unprecedented wave of strikes” at Israel and several nearby countries hosting US bases.
In Israel, sirens and mobile-phone alerts sent people rushing to shelters as missile barrages, mostly intercepted, came in.
Blasts were reported in the United Arab Emirates, Jordan, Qatar, Bahrain and Saudi Arabia, with footage showing people fleeing a smoke-filled passageway at Dubai International Airport.
CNBC said drone strikes caused damage and injuries at Dubai International Airport and Zayed International Airport in Abu Dhabi.
The conflict immediately hit aviation.
Airlines cancelled more than 1,800 flights in and out of Middle Eastern countries on Saturday and another 1,400 on Sunday, with some services paused until at least the end of next week.
Qatar Airways temporarily suspended all flights, and Dubai-based Emirates said service at Dubai International Airport was halted.
Energy is the main transmission channel.
CNBC noted that Iran is OPEC’s fourth-largest oil producer and that more than 14m barrels per day — roughly one-third of the world’s seaborne crude exports — flowed through the Strait of Hormuz in 2025, with about three-quarters going to China, India, Japan and South Korea.
Bob McNally, a former White House energy adviser, told CNBC crude futures could rise US$5–7 per barrel when trading opens if there is no sign of de-escalation and warned that Iran’s ability to threaten the Strait could push prices above US$100 per barrel.
On crypto-exchange Hyperliquid, perpetual swap futures tied to oil jumped nearly 5 percent to US$71.7 per barrel, while those linked to gold rose about 1.2 percent.
CNBC added that Bitcoin initially dropped when bombing began on Saturday, then ended the day 1.8 percent higher at US$66,725 before slipping to US$66,325 early Sunday.
Analysts cited by Reuters warned that any significant and prolonged disruption through the Strait of Hormuz — which one expert described as “the most important maritime chokepoint in the world” — could amount to a “monumental shock” and push oil above US$100.
Energy analysts at Eurasia Group told Reuters that oil prices are likely to jump US$5–10 per barrel above a roughly US$73 baseline on Iran’s claim to have closed the Strait and tanker disruptions, while Barclays’ analysts said Brent could hit US$100 as markets confront “their worst fears.”
Against that, some policy voices quoted by the Financial Times argued that a US$10-per-barrel move “will not move the dial” much on inflation and growth and noted that Iran supplied less than 3 percent of global crude in January.
But Barclays’ Ajay Rajadhyaksha warned in the same report that every sustained US$10 rise in oil prices can shave 10–20 basis points off growth over 12 months and that oil at US$120, if maintained, would deliver “a considerable hit” to the US and world economies.
Even before the strikes, the Financial Times said US bank stocks had just suffered their steepest sell-off since an earlier tariffs shock, amid worries about private credit and AI-related disruption.
Now, as analysts quoted by CNBC warned, markets face “too many shocks happening at once,” with last week’s inflation scare and tech-led weakness abruptly sharing the stage with an oil and war risk that could redefine the near-term playbook.
