Global financial markets remained under pressure on Saturday as the S&P 500 sat approximately 4.3% below its level from the day before the Iran war began on February 28. The decline, while significant, reflected a market that had so far absorbed the shock of a major Middle Eastern conflict without the kind of catastrophic selloff that some analysts had feared in the opening days of the campaign. Nevertheless, the persistent downward drift over four weeks signaled that investors had found no reason to price in a near-term resolution, and the day’s news of Houthi missile strikes on Israel and ongoing Iranian attacks on Gulf state infrastructure did little to encourage optimism.

Brent crude oil, the international benchmark, settled at $119.40 per barrel on Friday, the last trading session of the week, up from roughly $82 before the war began. The nearly 45% increase in oil prices in less than a month represented one of the sharpest commodity price shocks in recent decades. Analysts at three major investment banks maintained forecasts that prices could reach $140 or higher if the Strait of Hormuz were to be significantly disrupted or if the conflict widened to involve additional regional actors. The Hormuz strait, through which roughly 20% of global oil supply passes, had remained open but was operating under heightened threat conditions.

In China, the world’s largest crude oil importer, consumer gasoline prices had risen approximately 20% since the conflict began, according to data from the National Development and Reform Commission. The increase was compounding pressure on Chinese manufacturers already dealing with slowing export demand and a fragile property sector recovery. Beijing had released strategic petroleum reserves in the first week of the war in an attempt to dampen the price spike, but the intervention had provided only temporary relief as global supply anxieties persisted.

European economies were also contending with significant energy cost increases, with natural gas futures on the TTF benchmark rising sharply amid concerns about Middle Eastern supply disruptions and the potential for energy market volatility to spill into heating and electricity costs ahead of the northern hemisphere’s spring transition. Several European governments announced emergency measures to shield the most vulnerable consumers, including temporary price caps and accelerated payments from energy relief funds established during earlier energy crises.

In the United States, the national average price of regular gasoline had risen to approximately $4.18 per gallon from $3.12 before the war began, according to the most recent AAA data. The increase was already visible in consumer sentiment surveys, which showed a sharp deterioration in economic confidence in March compared with February. Several economists noted that fuel price increases of this magnitude function effectively as a tax on consumption, diverting household spending from discretionary goods and services toward energy costs.

The Federal Reserve found itself in a difficult position. Interest rates remained at levels intended to address lingering post-pandemic inflation, but the new wave of energy-driven price increases was being generated by an external supply shock rather than domestic demand — precisely the kind of inflation that monetary policy is poorly suited to address. Minutes from the Fed’s most recent meeting, released earlier in the week, showed policymakers sharply divided over whether to hold rates steady, cut to protect growth, or consider additional tightening to prevent energy price increases from feeding into broader inflationary expectations.

Equity markets showed differentiated performance within the overall decline. Energy sector stocks were the clear outperformers, with major oil companies posting substantial gains since the war began. Defense contractors also saw significant share price appreciation as the prospect of extended military engagement and replenishment of munitions stockpiles lifted revenue expectations. Technology stocks, by contrast, were among the hardest hit, as rising rates and slowing consumer spending darkened the outlook for companies dependent on advertising revenue or discretionary technology purchases.

Shipping costs had risen sharply, with the Baltic Dry Index and container freight rates both elevated well above their pre-war levels. Insurers had imposed war risk surcharges on vessels transiting the Persian Gulf, Red Sea, and adjacent waters, adding costs that were being passed through supply chains to consumers. Several major shipping lines had announced route diversions to avoid high-risk zones, adding days and significant fuel costs to journeys that would previously have transited through the Suez Canal or the Gulf.

Agricultural commodity markets were also registering the conflict’s effects. Wheat, soybeans, and palm oil had all risen since the war began, partly reflecting higher transportation costs and partly anticipating disruptions to the spring planting season in regions already experiencing fuel shortages. The World Food Programme issued a warning on Friday that the intersection of conflict-driven price increases with existing food insecurity in parts of Africa, the Middle East, and South Asia was creating conditions that could tip millions of additional people into acute food crisis within months.

Currency markets reflected diverging fortunes. The U.S. dollar had strengthened moderately against most emerging market currencies since the war began, as investors sought safe-haven assets. The Israeli shekel had weakened sharply. Gulf Cooperation Council currencies, pegged to the dollar, remained stable by design, but their underlying economies were absorbing both the revenue windfall from higher oil prices and the security costs of a conflict that had brought Iranian missiles onto Saudi and Emirati territory.

Market analysts watching the diplomatic developments in Islamabad were cautiously monitoring whether any progress in peace talks might trigger a rally in equity markets and a pullback in oil prices. Historical precedent suggested that even preliminary signals of a ceasefire could produce rapid and substantial moves in both directions. But most strategists said they were not positioning aggressively for a peace scenario, given the long distance between the parties’ stated positions and the absence of any concrete framework for ending the fighting.

The net economic verdict on the war’s first month, as judged by financial markets, was one of sustained pain rather than acute crisis: damaging enough to slow growth, increase costs, and erode confidence, but not yet severe enough to produce the kind of systemic financial stress that would force emergency policy responses. How long that assessment held depended almost entirely on developments in the Persian Gulf that no financial model could reliably predict.