Stock Markets Slide on Inflation Fears

Global equities fell sharply in early March as oil prices spiked on the intensifying U.S.–Israeli war with Iran. U.S. indexes opened lower and closed with sizeable losses: on Mar 5 the Dow dropped 1.61% and S&P 500 fell 0.56%. In Europe the STOXX 600 lost about 1.3%, and Asia’s MSCI index declined ~1.9% (South Korea’s Kospi plunged 7.2% on Mar 3). Commodity-related and growth-sensitive sectors suffered the worst losses. The bond market sold off (yields up) and the U.S. dollar strengthened as investors sought safety.

Oil surged alongside markets: Brent crude futures settled at ~$92.70/bbl (the highest since April 2024) and WTI at ~$90.90, with weekly jumps of ~27–36% (the biggest since COVID-era). U.S. stock expert Mona Mahajan of Edward Jones warned “We have a cloud of uncertainty with the Iranian crisis… no meaningful clarity on how long this will last and what the impact will be.” Kevin Gordon at Charles Schwab noted the war’s impact on Europe’s oil importers: “How much this war is disproportionately hitting Europe and other oil-importing countries is really being highlighted right now”. Volatility spiked – the VIX fear index rose to a multi-month high.

Overall, markets are pricing in higher inflation risks. For example, U.S. 10-year yields jumped and oil-related stocks rallied on safe-haven demand for energy, while cyclicals and banks fell. Investors are bracing for possible spillovers if the conflict widens. As one analyst put it, “The very meaningful move higher in oil prices” after tanker attacks has unnerved markets. On the pull side, however, an Edward Jones strategist pointed out that past Mideast conflicts have been “relatively short-lived” historically, suggesting risks of sharp reversals once the situation stabilizes.