Global stock markets in free fall this morning

S&P 500 futures were down over 1% before the open in New York as the price of oil went over $100 per barrel. The index fell 1.33% in its last session. Asian markets were a disaster: Japan’s Nikkei 225 fell 5.2%, South Korea’s KOSPI fell 5.96%. Like toppling dominoes, the U.K.’s FTSE 100 was down 1.4% in early trading and the Europe Stoxx 600 sank 1.85%. The VIX “fear index” (volatility) is through the roof.

TOP STORIES

IRAN

‘The doomsday some oil analysts believed could never happen was coming to pass’

It’s day 10 of the war with Iran. The price of oil briefly hit $119 per barrel this morning, and stock markets fell sharply around the world as it became clear that the war would become worse before it got better:

• Iran appointed Mojtaba Khamenei, the son of its recently killed leader, as its new supreme leader. He’s a hard-liner who will likely seek revenge for the death of his father.

Finance ministers from the G7 are set to meet at 8:30 a.m. New York time to discuss releasing reserves held by the International Energy Agency, according to the Financial Times. There’s only one problem with that: They have only a one-month supply. 

• In the U.S., Democrats are calling for the Strategic Petroleum Reserve to be opened up. 
• Analysts expect the price of gas at U.S. pumps to go over $4. 
• The Bahrain Petroleum Company declared “force majeure” across a number of its operations after Iran bombed a refinery complex. Saudi Arabia and Abu Dhabi were all attacked over the last 24 hours. 
• S&P Global vice chair Daniel Yergin called the situation “the nightmare scenario.” The Wall Street Journal wrote that “the doomsday some oil analysts believed could never happen was coming to pass.”

President Trump told people not to worry. “Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!” he said on social media.

• Water supplies are now targets: In another worrying development, both Bahrain and Iran reported attacks on their water desalination plants. If water supplies are cut, that would force the mass evacuation of entire cities. Riyadh, for instance, cannot survive more than a week without its seawater processing plants, as Fortune noted last week.
• In Saudi Arabia, the U.S. evacuated its government staff from Riyadh.
• War Secretary Pete Hegseth declined to rule out putting U.S. “boots on the ground” in Iran.
• Keep an eye on Kharg Island: 90% of Iran’s oil is exported from this port. The U.S. and Israel have so far avoided striking it on the basis that it will be needed to rebuild a postwar economy. If Kharg is targeted, all bets are off.

This is what Trump called his ‘worst case’ scenario

Fortune’s Jason Ma reported that, when asked in the Oval Office last week for the worst-case scenario in Iran, Trump replied, “I guess the worst case would be we do this and then somebody takes over who’s as bad as the previous person, right? That could happen.” That is exactly where we are right now.

Meanwhile in Moscow: The war is having the effect of helping Russia in its conflict with Ukraine, even though Russia has been accused of supplying intel to Iran that might endanger U.S. troops. High oil prices essentially rescue Russia’s ailing oil export industry, providing Moscow with fresh foreign currency to fund its operations in Eastern Europe. The White House recently gave India a sanctions waiver allowing it to buy more oil from Russia. “This waiver constitutes an inexplicable act of material benefit to the enemy,” according to a letter sent to U.S. Treasury Secretary Scott Bessent from Democrats.

• On Saturday, Trump promised to relentlessly pursue the war: “Today Iran will be hit very hard! Under serious consideration for complete destruction and certain death, because of Iran’s bad behavior, are areas and groups of people that were not considered for targeting up until this moment in time,” he said.

CHART OF THE DAY

Oil, obviously

Oil began trading above $100 a barrel today, according to data from TradingEconomics.com.

IN THE CRYSTAL BALL…

Rising prices, falling stocks could hurt Republicans in the midterms

• “We believe that while the conflict may support the dollar in the near term, the medium-term outlook could look far less favorable. The conflict has already pushed gasoline, diesel, and jet fuel prices higher, worsening an already delicate cost-of-living backdrop. That dynamic could hurt Republicans in May’s midterm elections and reignite a political risk premium that weighs on the greenback,” according to Antonio Ruggiero, FX & macro strategist at Convera.
• “In terms of financial markets, the higher oil prices go, the more the short end of interest rate curves are repriced higher and the greater pressure builds at the long end of the bond market. A much bigger unwind remains the risk for global equity markets as higher energy prices dampen growth prospects, while higher longer-dated interest rates sap the net present value earnings of the growth stocks,” ING’s Chris Turner said.

NUMBER OF THE DAY

18%

The rise in the price of coffee in the U.S. since January 2025, according to UBS’s Paul Donovan. “U.S. gasoline prices on Sunday were 23% above this year’s lows. The price level is not likely to disrupt GDP growth (it is below mid-2024 levels), but it will change inflation perceptions. Several high-frequency purchases have risen significantly in price since January 2025 (beef +15%, coffee +18%), and consumers tend to remember such increases. Perceptions create the U.S. affordability crisis,” he told clients this morning.

QUICK HITS

• Economist Dambisa Moyo says CEOs must play a role in sustaining the consumer class as AI eliminates jobs by Diane Brady
• A high profile OpenAI departure points straight at the Pentagon deal and shows the storm is not blowing over by Alexei Oreskovic
• Despite rising prices, Trump downplays need to tap Strategic Petroleum Reserve. ‘There’s a lot of oil out there. That’ll get healed very quickly’ by The Associated Press
• Here’s why childcare is getting more unaffordable and forcing families to make ‘heartbreaking choices’ by Jason Ma

THE FRONT PAGES TODAY

‘Sky is the limit’: Analysts warn oil prices could surge further – CNBC

Who is Mojtaba Khamenei, Iran’s new supreme leader? – BBC

Scoop: U.S. dismayed by Israel’s Iran fuel strikes, sources say – Axios

They feel bugs inside them. Doctors don’t know why – The New York Times

ONE MORE THING

Head of Citi’s ‘internal hit squad’ has left

Yamini Patel, Citi’s head of investigations for the U.K., Europe, and Russia, has left the bank, according to Sarah Butcher of eFinancial Careers. Patel ran Citi Security and Investigative Services, “tasked with tackling wrongdoing at Citi,” Butcher says. “Citi’s CSIS operates as HR’s internal hit squad, highly trained to protect the firm at employees’ expense,” Citi MD Ardith Lindsey said. Although CSIS is internally unpopular because it has used employees’ testimony against them in court, colleagues say Patel “was both well-liked at Citi and very good at her job.”