The price of oil has clocked its biggest single-day gain in six years – with Brent crude surging by more than 20% to $114 (£85) a barrel.
It comes as investor uncertainty surrounding the war in Iran deepens, with fears growing of a prolonged conflict across the Middle East.
Stock markets across Asia also fell early on Monday – with South Korea’s KOSPI index plunging by more than 6%.
The sudden drop meant an emergency circuit breaker was activated that halted trading for 20 minutes.
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Futures tracking indices in Europe and the US have also dropped, indicating further sell-offs could lie ahead as the day progresses.
Oil’s latest rally follows a 28% jump last week, fuelling concerns of inflationary pressures that could raise living costs.
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This could also make interest rate cuts less likely – meaning the cost of borrowing remains higher for longer.
In a post on Truth Social, US President Donald Trump insisted that the spike would be temporary.
He wrote: “Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!”
Of particular concern to analysts is the effective closure of the Strait of Hormuz – a critical route that handles roughly 20% of global oil shipments.
Maritime traffic has effectively ground to a halt after Iranian officials threatened to “attack and set ablaze any ship attempting to cross”.
JPMorgan’s chief economist Bruce Kasman said: “The global economy remains dependent on the concentrated flow of Mideast oil and natural gas through the Strait of Hormuz.”
He went on to warn that Brent crude could spike to $120 (£90) in the near term – but this should cool again should the conflict subside.
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Without a “clear and decisive political resolution”, Mr Kasman believes that global economic growth could take a 0.6% hit in the first six months of 2026 – with consumer prices rising by an annual rate of 1%.
The Bank of England had been expected to cut interest rates twice before the US and Israel began striking Iran – but now, markets are pricing in just a 40% chance of one reduction.
Market turbulence is also having an impact across currencies – with the dollar continuing to strengthen against the pound and the euro.
