Brent crude briefly hit $119.50 per barrel Monday - its highest level since Russia's 2022 Ukraine invasion - as the Strait of Hormuz remained effectively closed amid the U.S.-Israel campaign against Iran.
The Dow Jones Industrial Average fell as much as 886 points at session open, with the S&P 500 and Nasdaq each dropping approximately 1.3%–1.6%, as surging oil prices intensified expectations that inflation would remain elevated.
The broader selloff hit risk assets broadly. Bitcoin, which had already retreated from earlier highs during recent macro uncertainty, traded lower alongside equities as the VIX fear index rose above 30 for the first time since last April's tariff-driven spike.
What Happened
Oil prices have gained more than 50% since U.S. and Israeli strikes began against Iran on Feb. 28. The Strait of Hormuz - through which approximately 20% of global seaborne crude transits daily - has come to a near-standstill, with Iran's Revolutionary Guard threatening strikes against vessels attempting passage.
Vortexa data shows roughly 16 million barrels per day are now stranded behind the strait.
Iraq cut approximately 60% of its oil production as storage capacity filled. Kuwait shut in additional output. JPMorgan analysts projected production cuts could reach 4.7 million barrels per day by day 18 of closure.
Brent pared gains to around $103 after the Financial Times reported G7 finance ministers were meeting Monday to discuss a coordinated release from strategic petroleum reserves - though France's finance minister said no decision had been reached.
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Why It Matters for Crypto
Sustained oil above $100 complicates the Federal Reserve's rate path at a moment when crypto markets had been pricing in potential cuts. Investors are now focused on Wednesday's February Consumer Price Index and Friday's Personal Consumption Expenditures data - two inflation metrics the Fed uses to set policy.
A hotter-than-expected reading, combined with energy-driven price pressures, could push rate-cut timelines further out, maintaining pressure on leveraged and risk-sensitive assets including cryptocurrency.
Joe Mazzola, Director of Trading Services at Charles Schwab, said hedging activity ramped up sharply Monday, with sectors tied to economic growth - financials and industrials - leading the early selloff. Kpler's lead crude analyst warned that oil could reach $150 per barrel by month-end if Hormuz traffic does not normalize.
Macquarie strategist Vikas Dwivedi placed the same threshold at $150-plus if closure persists for several more weeks.
U.S. Energy Secretary Chris Wright said Sunday that regular tanker traffic would resume once Iran's ability to threaten ships was neutralized, without specifying a timeline.