Global Markets Strain as U.S.-Iran War Drives Oil, FX and Bond Volatility

Global markets are showing widening stress as the U.S.-Iran war pushes up energy costs, pressures Asian currencies and renews inflation concerns, Reuters reported on May 12, 2026. The conflict has hit oil-importing economies hardest, with Indonesia’s rupiah falling to a record low on May 12 and currencies in India, the Philippines, South Korea, Thailand and Malaysia also under pressure. Japan’s yen has weakened toward 160 per dollar as higher oil prices compound low interest rates and fiscal concerns. Japan imports about 95% of its oil from the Middle East. Central banks across Asia have intervened in currency markets, though analysts say reserve sales may give way to other support measures. U.S. gasoline prices have risen from about $3 to more than $4.50 a gallon, according to AAA. Jet fuel prices are up nearly 84% since the conflict began, contributing to Spirit Airlines ceasing operations in May 2026. U.S. 10-year Treasury yields are near 4.40%, about 40 basis points above prewar levels.