Last night, the financial markets underwent significant changes.

How AI and U.S. Military Actions Could Trigger a Surge in the Oil Market

Source: Wall Street Intelligence Circle

The market is beginning to price in the worst-case scenario again.

A new development has caused fresh turmoil in the financial markets: According to Axios, the U.S. is considering military action against Halul Island in Iran, but no final decision has been made yet (America’s “restraint” is fading).

• Crude oil and the dollar have reversed their declines and are now rising, with the 10-year U.S. Treasury yield climbing back to 4.30;

• U.S. stock futures are falling, and gold prices are narrowing their gains.

First, the risk of oil prices rising remains greater than the risk of falling. Brent crude is expected to rise for the third consecutive week, but unlike last week’s rally—which was mainly driven by sentiment—this time, supply disruptions are real.

The most vulnerable points in the global energy system are being repeatedly hit:

• The Strait of Hormuz is nearly closed, threatening shipping routes;

• Attacks on energy facilities are disrupting production and processing;

• Major oil-producing countries are forced to cut output, meaning supply isn’t just expected to decrease—it’s actually decreasing.

These three factors combined are shifting the market from “tension” to “panic pricing.” If people start to believe this isn’t a short-term issue that will end in a few days, but will drag on until late April or even longer, the logic of oil pricing will change completely. Traders will no longer ask “Will prices go up?” but rather “Will they reach $120, $150, or even $180?”

Second, Trump’s reassurance seems more like an attempt to suppress expectations rather than solve the problem. He says “It’s not that bad, it will end soon,” along with releases from reserves, discussions on sanctions adjustments, and no export bans. The core aim of these actions is to prevent the market from anchoring oil prices at a much higher level. But if the Strait of Hormuz remains closed, the U.S. will find it difficult to maintain low oil prices through other means.

Third, the biggest danger now isn’t excessive market pessimism, but rather insufficient pessimism. Many still assume the conflict will be quickly contained, shipping lanes will reopen, and production will gradually recover. But the signals today tell a different story—if Halul Island becomes a viable option, it indicates the U.S. is considering more aggressive measures to open up the situation. At this point, market reliance on “short-term war resolution” becomes the most fragile part.

Tonight, the market’s most critical warning isn’t that oil prices have risen a few dollars again, but that the market’s imagination of the war’s boundaries is expanding.

As long as Trump hasn’t made a final decision, every minute of waiting adds to the “panic pricing.” If on Monday, ground operations or a full blockade actually occur at Halul Island, $120 oil will be far from the end of the story.