'$120 oil is not out of the question': US strike on Iran puts markets in a minefield on Monday

The S&P 500 and Nasdaq closed lower on Friday amid fears of a widening war and soaring inflation from rising energy costs. Traders flocked to safe-haven assets, pushing up the dollar and gold prices.

The US airstrikes on three major Iranian nuclear facilities have raised global concerns about a wider conflict.

President Donald Trump described the attacks as a pressure tactic to force Iran to the negotiating table and insisted that no more attacks were planned "at this time." But tensions in the Middle East remain high. The US military and its regional allies are on high alert to prevent Iran from retaliating against US or allied targets.

Brent crude futures surged nearly 18% this week, hitting $79 a barrel at one point before retreating. By the weekend, oil prices settled around $77 a barrel, with West Texas Intermediate futures hovering around $75 a barrel.

Shipping insurers have designated the Strait of Hormuz as a high-risk area, causing tanker freight rates to double and forcing some ships to change routes.

"The risk premium on oil has returned strongly. If the strait is disrupted, it is not impossible for oil prices to reach $120 a barrel."

Several major banks and analysts, including JPMorgan Chase, Citigroup and Deutsche Bank, have simulated various scenarios, arguing that a complete closure of the strait or a long-term disruption could push crude prices to $120 to $130 a barrel, or even higher if the disruption lasts.

The S&P 500 and Nasdaq closed lower on Friday amid concerns about an intensifying war and soaring inflation due to rising energy costs. Traders flocked to safe-haven assets, pushing up the dollar and gold prices. Market volatility increased as investors liquidated their positions before the weekend.

As markets prepare to reopen on Monday, analysts warn that prices will see a big gap if Iran retaliates or there are new attacks. "The stock market is in danger," said one portfolio manager.

Beyond markets, the conflict presents a serious policy dilemma. Higher oil prices could derail central banks’ plans to cut interest rates. Global inflation could heat up again just as so many economies try to cool.

While Trump has left the door open for diplomacy, the coming days will test whether this is a turning point or the beginning of a deeper conflict.