Oil at $112, Markets in a Fourth Week of Losses — What to Watch This Week

Global markets opened Monday under heavy pressure as the US-Iran conflict entered its fourth week with no clear path to de-escalation.

What Happened

The S&P 500 closed Friday down 1.5%, marking a fourth consecutive week of losses. US futures pointed lower again Monday morning. Asian markets took a sharp hit — Japan's Nikkei plunged up to 6%, while India's Sensex dropped over 1,800 points at the open.

At the center of the sell-off: oil. Brent crude is holding around $112 per barrel, with WTI near $99. The Strait of Hormuz — the narrow waterway through which roughly 20% of the world's oil passes daily — has been effectively closed since early March, choking supply routes and triggering force majeure declarations from major Gulf exporters.

Over the weekend, President Trump issued a 48-hour ultimatum to Iran, which Tehran publicly rejected. That exchange kept risk sentiment firmly in the red heading into Monday.

Why It Matters

Oil above $110 isn't just a commodity story. It feeds into everything: transportation costs, food prices, manufacturing inputs, and inflation expectations. Barclays estimates that if Brent averages $100 through 2026, global growth would come in 0.2 percentage points lower while headline inflation would run 0.7 points hotter than expected.

For Turkey specifically, the picture is even more acute. Finance Minister Mehmet Şimşek warned last week that the oil shock risks derailing Turkey's disinflation program. Turkey imports the vast majority of its energy, so elevated crude prices directly widen the current account deficit and put pressure on the lira. Fitch noted Turkey can absorb a short conflict, but a prolonged war raises real risks for the economy.

Tourism — a crucial foreign currency earner for the eastern Mediterranean — is also under threat as travelers reconsider the region.

What to Watch This Week

• Trump's 48-hour deadline: Whether this leads to escalation or an opening for talks will set the tone for markets this week.
• Oil supply signals: Any indication of Hormuz reopening or alternative supply routes would be a major catalyst.
• Central bank commentary: The Fed and ECB are both in a bind — war-driven inflation argues against rate cuts, but growth concerns argue for them.
• Earnings season ramp-up: Several major companies report this week, and forward guidance in the context of $100+ oil will be closely watched.

Bottom Line

Markets are pricing in a conflict that could drag on. The key variable isn't the war itself — it's whether the economic damage from elevated oil prices starts feeding into consumer behavior and corporate earnings. Until there's clarity on Hormuz or a diplomatic breakthrough, expect more volatility.

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Sources:

• Bloomberg: Markets Brace for Volatility
• CNBC: Strait of Hormuz Deadline
• The Guardian: How Iran War Could Shock Global Economy
• Bloomberg: Turkey's Simsek on Oil Shock