A joint US-Israeli aerial bombardment of Iran over the weekend killed Supreme Leader Ayatollah Ali Khamenei along with a large portion of Iran's military and political leadership, triggering an immediate and sweeping Iranian retaliatory response. Iran launched missiles and drones at Israeli and American military installations across the Gulf, striking bases in Qatar, Kuwait, Jordan, the United Arab Emirates and Bahrain, as well as targeting the US embassy in Riyadh and civilian infrastructure including hotels. The Trump administration, through Secretary of State Marco Rubio, described the pre-emptive US strikes as a response to Israel's determination to attack Iran and the certainty that American troops would be targeted.

Gulf states joined the United States in issuing a joint statement strongly condemning what they called Iran's "indiscriminate and reckless missile and drone attacks," warning the strikes threatened broader regional stability. More than 100,000 British nationals were stranded across the Gulf region as of Monday, with airspace closed to most commercial flights and overland evacuation routes considered too dangerous. The rapidly escalating conflict has drawn in countries across the Middle East and raised fears of a wider regional war that governments and international observers had long sought to prevent.

Global energy markets reacted sharply, with Brent crude oil rising approximately 8.5% on Monday to around $79 a barrel, continuing a climb from just above $60 in January as US-Iran tensions had been building throughout the year. European benchmark natural gas prices surged 38% after state-owned QatarEnergy announced it was halting production at two sites following drone strikes on its facilities. Shipping through the Strait of Hormuz, which carries roughly 20% of global oil supplies, was disrupted as tankers declined to transit the waterway and insurers pulled back from offering coverage.

Economists at Goldman Sachs warned that a worst-case scenario involving a complete one-month blockage of the Strait of Hormuz could push oil prices up by as much as an additional $15 per barrel. The price spike arrives at a difficult moment for central banks in Europe and the United Kingdom, which had only recently brought inflation from post-pandemic and post-Ukraine war highs under control. In the UK, the probability of a Bank of England interest rate cut at its March 19 meeting fell from roughly 80% to 69% on Monday morning, reflecting market concern that sustained energy cost increases could reignite inflationary pressure.