Oil prices have become the dominant force shaping global financial markets as the Middle East conflict triggers an energy shock unseen since the 1979 Iranian revolution. Investors are scrambling to disentangle winners and losers from surging inflation, with the International Energy Agency warning of the “largest supply disruption in history.” This volatility has split markets: U.S. dollar bets rebounded after a yearlong slump, while the euro slumped 3% against it, reflecting fears of growth slowdowns from higher energy costs. Bond markets face turmoil too, as short-term debt plunges amid expectations that central banks will delay rate cuts.

The Bank of England, already grappling with 3% inflation, now appears poised to hike rates—a stark reversal from prior cut assumptions. Meanwhile, South Korea and South Africa, heavily reliant on energy imports, saw their currencies plummet over 5% and 3%, respectively, as traders bet on prolonged economic pain.