New incidents in the Gulf region set the tone for markets at the start of the week as supply-risk concerns pushed oil prices higher and shifted investor appetite away from equities.
U.S. forces struck two missile launchers on Larak island in the Strait of Hormuz, while Tehran mounted an attack on U.S. forces based in Jordan. Adding to the uncertainty, a social media post by President Trump claimed Kharg Island, Iran's principal oil terminal, had been "blown to smithereens"; that statement has not been corroborated by military sources. Analysts and market participants have also reported attempts by Iran to use rockets to deploy naval mines in the strait - an action that complicates efforts to keep the main shipping channel clear.
These developments helped lift Brent crude by roughly 2.4% to trade again above $90 a barrel, a move that increased pressure on equity markets. The disruption narrative is amplified by the difficulty faced by naval and escort operations: even if the U.S. military asserts it has cleared the primary passage for shipping, Iranian forces retain the capability to attempt similar mine-laying or rocket strikes repeatedly and from multiple points along the coastline, making continuous clearance a challenging task.
Despite these headwinds, some indicators suggest export activity from the Gulf has not collapsed. Goldman estimates that total Gulf oil exports are currently running at about 15-16 million barrels per day - a level that is 7-8 million barrels per day below pre-war throughput but roughly 5-6 million barrels per day above the low recorded in March. Part of the mitigation appears operational: there are reports that tankers are transiting with transponders switched off and moving at night, measures that make them harder to track on conventional ship-tracking platforms.
On the diplomatic and commercial front, President Trump said oil from a recently struck deal with Venezuela would be used to replenish the U.S. Strategic Petroleum Reserve. Commentary in market circles suggests that analysts view any meaningful increase in Venezuelan production as unlikely for years, if ever, which tempers expectations that the spare supply will be rapidly available.
The risk-off tone extended beyond oil. Most Asian stock markets opened in the red, and European and U.S. share futures were softer by roughly 0.4% to 0.5%. Japanese bond yields mirrored Friday's selloff in U.S. Treasuries, with 10-year yields in Japan rising to levels not seen since 1996. Market pricing implied about a 70% chance that the Bank of Japan would raise rates at its meeting on September 18, a stance that drew what was described as not-so-subtle encouragement from Treasury Secretary Scott Bessent.
The coming weeks are packed with policy events that could intersect with energy and geopolitical risk to shape market direction. New Zealand's central bank is widely seen as certain to hike again at its Wednesday meeting, while the Bank of Canada is expected to hold steady, in part due to concerns about the economic fallout of a trade dispute with the U.S. Market participants were heavily pricing in an ECB rate increase at the September 10 meeting, and implied probabilities put the Federal Reserve's chance of hiking at about 58% for September 16.
Rates, bond markets and inflation dynamics are likely to be prominent on the agenda when G20 finance ministers and central bank governors meet in North Carolina on Monday and Tuesday. With Brent near $90 a barrel and no clear end to the Gulf tensions in sight, markets are assuming a generally hawkish tone leading into those discussions.
Market calendar highlights for Monday
- German CPI - Harmonized Index of Consumer Prices (HICP) for August
- G20 meetings of finance ministers and central bankers in North Carolina