Global markets tumbled Thursday as renewed U.S. military strikes against Iran sent oil prices soaring more than $2 a barrel, threatening to deepen inflationary pressures on working families and businesses already struggling with elevated energy costs.
World shares declined following what the U.S. military described as defensive strikes against Iran, reversing a brief respite in oil prices that had offered hope for consumers facing pain at the pump. In early European trading, Britain's FTSE 100 slumped 0.9% to 10,416.62, while the CAC 40 in Paris lost 0.4% to 8,172.84. Germany's DAX was nearly unchanged at 25,175.63. The futures for the S&P 500 and the Dow Jones Industrial Average edged 0.1% lower.
Military Escalation Continues
U.S. officials said Central Command forces shot down four Iranian one-way attack drones that posed a threat near the Strait of Hormuz. The U.S. military also hit an Iranian ground control station in Bandar Abbas that was about to launch a fifth drone. Those attacks followed others earlier in the week.
President Donald Trump said Iran is "negotiating on fumes" and said November's midterm elections in the United States won't make him rush into a deal to end the nearly three-month-old conflict.
Asian Markets React to Uncertainty
During Asian trading, Japan's Nikkei 225 lost 0.5% to 64,693.12, while the Kospi in South Korea lost 0.5% to 8,185.29. Hong Kong's Hang Seng index shed 1.3% to 25,006.16, while the Shanghai Composite index edged 0.1% higher to 4,098.64. In Australia, the S&P/ASX 200 declined 1.4% to 8,592.90, while Taiwan's Taiex dropped 1.4%.
Tan Boon Heng of Mizuho Bank in Singapore said, "Conflicting reports on the contours of a U.S.-Iran deal dampened risks sentiments as markets grow increasingly wary about the possibility of a deal," and added, "While there is desire to maintain the ceasefire with both Iran and the U.S. toning down language on renewed attacks and persisting with indirect channels of communication, it remains remarkably hard to envisage how a compromise can be reached on key issues."
Energy Costs Squeeze Consumers and Workers
After the latest strikes, in early Thursday trading Brent was up $2.14 at $94.44 a barrel. A barrel of benchmark U.S. crude gained $2.12 to $90.80. On Wednesday, it had fallen 5.5%, to settle at $88.68, back to where it was in mid-April.
Prices have moderated, after surging to well over $100 a barrel, on hopes that the United States and Iran can reach an agreement to reopen the Strait of Hormuz and allow oil tankers to exit the Persian Gulf for deliveries again.
On Wednesday, U.S. stocks inched to more records after oil prices declined more than 4%, easing pressure on consumers and businesses worldwide. The S&P 500 edged up by less than 0.1% to 7,520.36 and the Dow industrials rose 0.4%, to 50,644.28. The Nasdaq composite gained 0.1% to 26,674.73. All three indexes set all-time highs.
Transportation Sector Volatility
Stocks of companies with big fuel bills helped lead the way on hopes that lower oil prices will remove a big drag on their profits. Norwegian Cruise Line Holdings climbed 6.1%, and United Airlines rallied 6.3%. Delta Air Lines rose 3% and set an all-time high.
The price for a barrel of Brent crude oil fell 4.6% to $92.25 after the ceasefire between the United States and Iran appeared to hold despite the U.S. military launching what it called "self-defense" strikes in southern Iran.
Stocks have been able to run to records despite the painful inflation and uncertainty caused by high oil prices largely because companies have reported surprisingly strong profits for the start of 2026, and the forecast is for them to continue.
In other dealings early Thursday, the U.S. dollar rose to 159.50 Japanese yen from 159.51 yen. The euro slipped to $1.1611 from $1.1626.
Why This Matters:
The renewed escalation between the United States and Iran threatens to impose significant economic hardship on working families and small businesses already grappling with inflation. Oil price volatility directly affects the cost of transportation, heating, and consumer goods, with low- and middle-income households spending a disproportionate share of their budgets on energy. The uncertainty surrounding diplomatic efforts raises questions about whether multilateral channels and international cooperation can effectively de-escalate tensions and protect the global economy. While corporate profits remain strong, the benefits of economic growth risk being concentrated among shareholders rather than workers facing higher costs of living. The situation underscores the need for strategic petroleum reserves, investment in renewable energy alternatives, and diplomatic engagement to prevent military conflicts that destabilize markets and hurt ordinary people.