Midnight Collective Dive! Iraq: Completely Cut Off! Iran Warns: Will Retaliate Severely!

The spillover effects of Middle East conflicts are continuing to spread to global markets!

Tonight, due to the escalation of the Iran situation, the three major U.S. stock indices opened lower and continued to decline. As of press time, the Dow fell 0.89%, the Nasdaq dropped 0.66%, and the S&P 500 declined 0.67%.

According to Xinhua News Agency, citing Iran’s Mehr News Agency on the 18th, a spokesperson from Iran’s Hatham Anbia Central Headquarters of the armed forces said they will severely retaliate against attacks on Iran’s energy infrastructure.

The Iraqi Ministry of Electricity stated that natural gas supplies from Iran to Iraq have been completely cut off. Earlier, on the 18th, Iran reported that some petrochemical facilities in South Pars and Asaluyeh in Bushehr Province were attacked by the U.S. and Israel. Subsequently, reports indicated that natural gas plants in phases 3 to 6 of South Pars were hit by U.S. and Israeli drones.

Additionally, on March 18 local time, global chemical giant BASF announced price increases for household care, industrial and public facility cleaning, and industrial formulations in Europe, with increases of up to 30% or more. The main reasons for the price hikes include rising raw material costs, energy costs, and logistics expenses.

European and American markets decline collectively

During Wednesday’s trading session, the three major U.S. stock indices all fell. As of press time, the Dow dropped 0.89%, the Nasdaq fell 0.66%, and the S&P 500 declined 0.67%. Tech stocks mostly declined, with Amazon, Microsoft, Oracle, Broadcom, and Western Digital falling over 1%; Meta, Apple, and Qualcomm declined over 0.70%; Google fell 0.25%; Nvidia rose slightly by 0.16%.

European stock markets also plunged during the session. As of press time, Germany’s DAX 30 fell 0.82% after initially rising nearly 1%; the UK FTSE 100 dropped 1.08% after rising 0.40%; the Europe STOXX 50 declined 0.76%; the OMX Copenhagen 20 fell 1.76%; and the Swiss SMI declined 1.59%.

Cryptocurrencies also tumbled collectively, with Bitcoin dropping nearly 3%, breaking below $72,000; Ethereum down over 4%, falling to $2,230; Cardano, XRP, and Solana each declined over 4%. According to CoinGlass data, in the past 24 hours, a total of 108,900 traders were liquidated globally, with a total liquidation amount of $292 million, over 70% of which were long positions.

On the news front, U.S. and Israeli attacks on an important Iranian natural gas facility have further escalated the already tense Middle East situation. The Iranian Islamic Revolutionary Guard Corps issued an emergency warning, stating that oil facilities in Saudi Arabia, the UAE, and Qatar have become legitimate targets.

According to Xinhua News Agency, citing Iran’s Mehr News Agency on the 18th, a spokesperson from Iran’s Hatham Anbia Central Headquarters of the armed forces said they will severely retaliate against attacks on Iran’s energy infrastructure.

Qatar’s Foreign Ministry spokesperson, Ansari, said on social media on the 18th that Israel’s strikes on facilities related to Iran’s South Pars gas field are a “dangerous and irresponsible act” amid the current regional military escalation. Ansari stated that actions targeting energy infrastructure threaten global energy security and also endanger regional populations and their ecological environment.

Brent crude oil has already risen over 70% this year, most of which occurred after the U.S. and Israel attacked Iran and Tehran retaliated against regional energy and shipping assets. The conflict has caused energy prices to surge, leading to fuel shortages and concerns over accelerated global inflation.

“The direct impact of the Strait of Hormuz potentially closing is rising energy prices, and U.S. authorities may seriously underestimate this,” said Thamas Varga, an analyst at broker PVM. The U.S. targets in Iran remain unclear, and the conflict’s end is still far off.

As the Federal Reserve guides monetary policy, central banks worldwide will carefully review the rising fuel prices—this week, U.S. diesel prices exceeded $5 per gallon. Fed officials will meet later Wednesday to set interest rates, with no expected changes.

The focus in the oil market remains on the practically closed Strait of Hormuz bottleneck. The situation is now driven by political considerations, with Iran possibly allowing only a few ships to pass based on their nationality, while blocking or obstructing most others.

Rob Rennie, head of commodities research at Westpac Banking Corporation, said, “Since hostilities seem unlikely to end soon, with increasing daily shutdowns and the Strait technically closed, we still believe Brent crude will stay in a new, higher range of $95 to $110 per barrel. If we see attacks on major refineries or further confirmation of the Strait being mined, we expect this range to expand by another $10 to $20.”

Chemical giant raises prices

The conflict in the Middle East is impacting Europe’s already struggling industry. On March 18, BASF, a German chemical group, announced it will raise prices in Europe for household care, industrial and public facility cleaning, and industrial formulations, with increases of up to 30% or more. The new prices take effect immediately or according to existing contracts.

BASF stated that the move is mainly to cope with significant fluctuations in key raw material prices and supply, rising domestic and international logistics costs, and soaring packaging and energy prices.

As early as March 4, BASF announced global price hikes for antioxidants, processing aids, and light stabilizers used in plastics, citing “significant increases in raw material costs and freight.” The increases reached up to 20%. These products are core additives in plastics, used in packaging, building materials, automotive parts, and more.

Last week, the German Chemical Industry Association warned that preliminary signs indicate the Middle East war is disrupting supply chains, with immediate rises in oil and natural gas prices beginning to spread to other raw materials.

A key economic sentiment indicator from the Berlin-based Ifo Institute of Economic Research this month showed a sharp decline in Germany, Europe’s largest industrial economy, with sentiment in chemicals, pharmaceuticals, and automotive sectors plunging. The institute’s president said that the escalation of the Middle East situation has driven up energy prices and increased inflationary pressures.