In the most consequential geopolitical development since the conflict began ten days ago, Iran’s Assembly of Experts formally named Mojtaba Khamenei — the 56-year-old son of the assassinated Supreme Leader Ali Khamenei — as the Islamic Republic’s third supreme leader on Sunday. The announcement came even as U.S. and Israeli bombs were landing on Iranian soil, and the IRGC launched its first missile salvo hours later under the new leader’s name.

The selection signals something markets did not want to see: hardline continuity, not capitulation. Analysts at CNN described the appointment as “an act of defiance,” noting that Mojtaba has deep ties to the Revolutionary Guard, has never held elected office, and is broadly considered to share his father’s confrontational worldview. Iran’s IRGC and armed forces swiftly pledged allegiance.

The appointment directly defied U.S. President Donald Trump, who had previously called Mojtaba a “lightweight” and declared that any supreme leader appointed without American approval would “not last long.” Tehran’s response was blunt: parliament speaker Ghalibaf wrote that Iran’s fate would be decided by Iranians, not by “Epstein’s gang.”

Brent crude briefly surged to nearly $120 a barrel Monday morning — up from roughly $72 before the war began — as the Strait of Hormuz remained effectively closed for the eleventh consecutive day, trapping exports from some of the world’s largest oil producers. The Strait normally channels about 20% of global daily oil supply, and Iran’s cheap drone strategy has ground tanker traffic to near zero without a single naval mine being laid.

Iraq’s oil output has collapsed by 70% to just 1.3 million barrels per day as southern oilfields run out of storage. Kuwait announced precautionary production cuts. The UAE’s ADNOC said it was “carefully managing offshore production.” Qatar’s LNG tankers are stranded near UAE ports, unable to reach Asian and European buyers. RBC Capital Markets’ global head of commodity strategy Helima Croft called it “the biggest energy crisis since the 1970s oil embargo.”

Prices pulled back slightly after the Financial Times reported that G7 finance ministers would hold an emergency call at 8:30 a.m. EST Monday to discuss a coordinated release of strategic reserves — potentially 300 to 400 million barrels, roughly 25–30% of combined G7 stockpiles. France initiated the call; the U.S., Italy, and at least one other G7 nation have expressed support. But analysts warn: reserves are a band-aid, not a cure.

The full weight of the Middle East crisis landed on Asian equity markets at Monday’s open, with devastating results. South Korea’s KOSPI triggered a circuit breaker, halting trading after plummeting 7.72%. Japan’s Nikkei 225 sank 6.45%. Taiwan’s TAIEX fell 4.86%. China, insulated somewhat by its unique oil supply arrangements and domestic policy backstops, fared relatively better — the SSE Composite declined just 0.78%.

The pain is structural. Asia imports 90% of the oil that passes through the Strait of Hormuz. China, India, Japan, and South Korea together account for nearly 70% of all crude shipments through the waterway. The disruption doesn’t just raise energy costs — it threatens to reignite inflation across the entire region at a moment when central banks had only recently begun to ease policy.

In the United States, futures pointed to a deeply negative open. Dow futures fell 768 points (−1.62%), paring earlier losses that had briefly seen them down over 1,000 points. S&P 500 and Nasdaq 100 futures lost approximately 1.5% each. The Dow is coming off its worst weekly decline in nearly a year. The IMF’s Global Markets Monitor noted that European equities also extended their weekly losses, with energy stocks the sole sector in positive territory.

Just days before Monday’s market open, the Bureau of Labor Statistics delivered a gut punch: U.S. nonfarm payrolls fell by 92,000 in February, far worse than the consensus estimate of a 50,000 gain and a stark reversal from January’s already-downwardly-revised 126,000 rise. It was the third time in five months that payrolls turned negative — a pattern with no precedent outside recessions and the pandemic.

Healthcare, the one sector that had reliably propped up hiring through 2025, turned sharply negative — shedding 28,000 jobs as a Kaiser Permanente strike sidelined over 30,000 workers in California and Hawaii. Federal government payrolls fell another 10,000, extending a cumulative loss of 330,000 federal jobs (−11%) since October 2024 under DOGE-era trimming. Manufacturing, transportation, information services, and construction all declined. The unemployment rate ticked up to 4.4%.

Indeed Hiring Lab called it “overwhelmingly disappointing — there’s no other way to say it.” The three-month average nonfarm payroll change has collapsed to fewer than 6,000 per month. Wage growth came in slightly hotter than expected at 3.8% year-over-year — an unhelpful combination when energy inflation is surging. Fed Governor Christopher Waller signalled the central bank might now lean toward cutting despite inflation risks: “If we get a bad number, why are you just sitting on your hands?”

The Iran conflict is no longer contained to the Middle East. On Sunday morning, Norwegian police investigated an explosion outside the U.S. Embassy in Oslo — a dramatic signal that Iran-linked proxies or lone actors are extending the conflict’s reach into Western Europe. The incident triggered immediate security reviews at U.S. diplomatic facilities across the continent. Washington has already ordered non-emergency personnel to evacuate its embassy in Saudi Arabia following a drone attack that damaged the Riyadh compound.

Across the Gulf, Iran’s expanded strikes have hit civilian and economic infrastructure with increasing precision. Kuwait reported damage to a desalination plant and a university building; Bahrain saw infrastructure strikes; the UAE had projectile debris fall in Abu Dhabi. Iran announced it fired its first missile salvo under Mojtaba Khamenei’s command within hours of his appointment — a clear message about continuity of military posture. Qatar’s defence ministry also reported a missile attack.

The escalating theatre of war is now forcing a realignment in global diplomacy. China stated that the leadership appointment in Tehran was “an internal matter,” signalling Beijing’s intent to remain a neutral power broker. A looming Trump-Xi meeting hangs in the balance. Meanwhile, China’s foreign minister Wang Yi outlined Beijing’s positions on the Iran war at a political gathering in Beijing, suggesting China may seek to leverage its proximity to Tehran as a mediating asset — or at minimum, as a bargaining chip in its own trade negotiations with Washington.