100 days of the Iran war: How markets, oil and inflation have reacted

Sunday marks the 100th day since the war in the Middle East began, and financial markets around the world have shown how vulnerable the global economy is to a protracted conflict. The fighting has pushed energy prices higher, rattled sovereign bond markets and begun to feed through into consumer prices even as some equity markets, led by the U.S., have continued to climb.

The crisis has produced repeated headline-driven swings: strikes and counterstrikes, temporary ceasefires, threats of broader escalation and intermittent diplomatic engagement. That uncertainty has translated into volatility across asset classes, from crude oil and sovereign debt to regional stock indices.

Markets: stocks, bonds and the uneven global reaction

Global equities initially sold off when the U.S. and Israel launched strikes, yet Wall Streets major averages erased early losses and the S&P 500 has reached fresh highs during the conflict. Investors have largely looked through the war, at least in U.S. equity prices, influenced by strong corporate fundamentals and optimism about AI-driven revenue growth concentrated among a relatively small group of technology and semiconductor companies.

The picture has been far less uniform elsewhere. Many European and emerging-market indices have lagged as rising energy costs hit those economies more directly. The chart of wartime performance by major indices shows winners in parts of Asia and the U.S., and notable weakness in markets more exposed to higher energy costs.

Government bonds have not been spared. Yields which move inversely to prices rose sharply in many markets as investors began to price in higher inflation and the prospect of a more hawkish monetary policy stance. The 30-year U.S. Treasury yield surged to levels not seen since before the Global Financial Crisis, reflecting concern over longer-run inflation and potential growth disruption. U.K. gilts have seen particularly aggressive selling amid a backdrop of domestic political turmoil and the war-driven rise in yields more generally.

Oil: supply constraints, higher prices and the risk this summer

The closure of the Strait of Hormuz and damage to key Middle East energy infrastructure forced a repricing of oil. At their wartime peaks, Brent crude climbed roughly 36% above pre-conflict levels and U.S. West Texas Intermediate futures were nearly 50% higher. Although prices have cooled from the highs, they remain well above where they traded before the war.

Several factors have moderated an even bigger price spike: releases from strategic petroleum reserves, sanction waivers temporarily allowing some Iranian and Russian barrels on the water, lower Chinese import volumes at times, alternative shipping routes, and rising U.S. crude exports and refined product flows. In the last 100 days U.S. exports of crude and refined products have risen noticeably, helping ease some tightness.

But inventories are falling. Analysts warn that if global stocks continue to decline into June, operational minimums could be reached and oil would likely accelerate back above $100 a barrel. Reopening the Strait of Hormuz quickly remains the clearest way to alleviate the supply shortage and the inflationary pressures it creates.

Inflation: price pressure broadening

The wars impact on energy has already begun showing in inflation data. Higher costs for oil, gasoline, jet fuel and natural gas are flowing through to consumer prices. In the United States the consumer price index reached an annual rate of 3.8% in April the highest in almost three years underscoring how energy-driven cost shocks can reverberate through broader prices.

Inflation readings in other major economies have likewise ticked up, prompting some governments to intervene. For example, Germany and India have implemented measures to blunt the impact of soaring fuel prices on households.

What investors and policymakers are watching next

Portfolio managers and strategists are focused on three interacting risks: how long the Strait of Hormuz will remain affected, how quickly inventories will be depleted, and whether higher energy costs will force central banks into more aggressive rate paths. Bond market investors appear to be treating the situation as persistent rather than transitory, keeping yields elevated.

Equities may remain supported in the near term by a concentration of gains in sectors benefiting from structural tech trends such as AI, but a broader market rally will be harder to sustain if inflation and bond yields stay high and economic growth slows. Market participants are also tracking diplomatic signals closely: ceasefires and negotiated exits would reduce the risk premium on energy and dampen upward pressure on inflation.

The longer the conflict continues without a durable, verifiable settlement, the greater the chance of demand destruction in energy markets and of growth headwinds that could catch up with equity valuations. For now, investors are balancing a mixed set of forces: elevated geopolitical risk and higher commodity prices against pockets of corporate strength and resilient consumer demand in some economies.

In sum, the first 100 days of the Iran war have been a reminder that geopolitics still matters for markets and the macro economy. The near-term path for oil, inflation and interest rates will depend largely on developments in the Gulf and on how quickly supply can be restored. Policymakers and investors alike will be watching those dynamics closely as the risk of further market dislocations remains real.

CNBCs reporting contributed to this summary.