Oil jumps, stocks drop as Mideast war prolongs market volatility

An employee fills the tank of a motorcycle at a gas station in the Donkoi district of Vientiane on March 10, 2026, amid rising petrol prices. [AFP]

Oil prices rallied and equities largely dropped Wednesday as traders assessed the latest impact for global markets from  the Middle East war.

Crude futures fluctuated between gains of between two and six percent as the release of oil reserves by some countries helped offset news of attacks on commercial ships in the Gulf.

"Oil prices remain volatile and risk sentiment fragile and trading is on the headlines and rapidly evolving conflict in the Middle East," noted Neil Wilson, Saxo UK investor strategist.

Wall Street indexes were mixed as markets digested a flat US inflation report and the uptick in oil prices.

The Dow index and Europe's leading stock markets retreated, after Asian indices mostly closed lower.

However, Tokyo and Seoul, which have seen the widest swings since the crisis unfolded, both finished more than one percent higher.

Financial markets have experienced huge volatility since the United States and Israel began attacking Iran on February 28.

Tehran has retaliated by attacking targets across the oil-rich Gulf and effectively shutting down the crucial Strait of Hormuz, through which nearly 20 percent of the world's oil usually transits to world markets.

Fears that the conflict could drag on -- choking off energy supplies -- sent both main crude contracts soaring on Monday to within a whisker of $120 a barrel, the highest since 2022. Gas prices also rocketed.

However, prices tanked on Tuesday after US President Donald Trump said the war "going to be ended soon".

"Markets are likely to grow increasingly fearful over the long-term implications with each day that passes," said Joshua Mahony, chief market analyst at Scope Markets.

"Oil prices remain the main driver of market sentiment," he added.

Certain countries' plans to release part of their strategic oil reserves "are undoubtedly part of a highly coordinated strategy", France's Finance Minister Roland Lescure said on Wednesday.

Japan and Germany announced that they plan to tap into their oil reserves to counter high energy prices, which are boosting share valuations for fossil fuel majors.

German arms maker Rheinmetall meanwhile said the Middle East war offered new business opportunities, especially for its air defence systems, as it forecast continued strong growth this year.

New attacks hit three commercial ships in the Gulf on Wednesday, officials said, with one vessel left in flames as Iran pressed its campaign against its oil-exporting neighbours.

US consumer inflation rose 2.4 percent year-on-year in February, the same increase as reported a month prior in data that met expectations.