Escalation spreads throughout the region
The escalation extended across the Gulf, with Iran-backed Houthi forces firing a missile at Israel for the first time since the start of the war, while Israeli forces intensified attacks in Lebanon and Beirut. Other incidents were reported at ports and infrastructure across the region, including outages in Oman, raising concerns over the security of major transport and logistics hubs.
The widening scope of the attacks has reinforced market fears that the conflict is no longer contained and could begin to affect energy flows and industrial operations across the Gulf.
Diplomacy fails to limit gains
Markets initially reacted to comments from Donald Trump, who extended an April 6 deadline for Iran to allow oil tankers to pass through the Strait of Hormuz. The move eased prices briefly as investors interpreted it as a possible window for de-escalation.
However, that relief proved short-lived. Prices resumed their uptrend as trading moved across global markets, with continued hostilities and conflicting signals from Washington and Tehran adding to uncertainty.
“The diplomatic dissonance this week between the US and Iran rattled investors,” said Doug Beath, global equity strategist at Wells Fargo Investment Institute. “By the end of the week, the risk appetite could not withstand the fog of war.”
Markets focus on scaling
Analysts said markets are increasingly discounting political statements unless they are backed by tangible progress, especially as the conflict spreads to new countries.
“Any further announcement by Trump about a deal is white noise for the markets,” said Jim Bianco, president and macro strategist at Bianco Research. “Only if the Iranians say the talks are going well will that affect the markets.”
The lack of coordination between the two sides, combined with continued military escalation and attacks on infrastructure, has kept oil prices supported even after temporary pullbacks.
The oil stays above the main levels
Analysts pointed to the persistence of oil prices above key psychological levels as a sign of fundamental strength.
Fawad Razaqzada, market analyst at FOREX.com, said crude oil’s ability to hold above $100 reflects sustained upward pressure. “Oil has returned to climb above the $100 level … this move builds on gains from the previous session as Iran effectively rejected Trump’s proposal for a ceasefire,” he said.
Razaqzada added that geopolitical tensions remain the dominant driver. “If it escalates, then we are likely to see significantly higher oil prices and much lower stock markets,” he said, noting that inflation risks are already rising due to higher energy costs.
The “Higher for Longer” view.
Market participants are increasingly shifting from expectations of a quick resolution to a prolonged period of elevated prices.
Stephen Innes, managing partner at SPI Asset Management in Singapore, said recent developments have not reduced the underlying risks. “The ten-day extension is time bought, not reduced risk, and markets are pricing in that difference,” he said.
He added that the stability of oil reflects deeper concerns related to the widening footprint of the conflict. “Oil remains the anchor, and its refusal to stay lower signals the risk of continued escalation under the headlines. The market is shifting from a quick price resolution to managing the probability of a longer, entrenched structural conflict.”
Fear of bidding to keep costs up
The standoff over the Strait of Hormuz remains central to price direction, but recent attacks suggest the risks are no longer confined to shipping lanes. Attacks on industrial zones, ports and logistics centers have raised concerns about wider disruptions to energy and supply chains across the region.
Analysts said the combination of limited shipping flows, attacks on infrastructure and a lack of diplomatic progress were likely to keep prices high in the near term.
While short-term volatility is expected to continue, the broader trend suggests that oil prices may continue to rise this week unless there is a clear and credible de-escalation in the region.
– With data from agencies
Justin is a seasoned personal finance author and business journalist with over a decade of experience. He makes it his mission to break down complex financial topics and make them clear, relatable, and relevant—helping everyday readers confidently navigate today’s economy. Before returning to his Middle Eastern roots, where he was born and raised, Justin worked as a business correspondent at Reuters, reporting on stocks and economic trends in both the Middle East and Asia-Pacific regions.
