Asian markets fell sharply and oil prices jumped on Monday after the United States joined Israel in attacking Iran's nuclear sites. This move has heightened the tension in the Middle East and raised concerns about disruptions to global energy supplies.

Iran is the world’s 9th largest oil producer, making about 3.3 million barrels of oil each day. It exports nearly half of that and uses the rest at home. Experts say if Iran chooses to strike back, it could try to block the Strait of Hormuz, a key waterway through which about 20% of the world’s oil is shipped.

Oil prices rose over 2%, reaching their highest level since January. Brent crude went up 2.7% to $79.12 a barrel, while US crude increased 2.8% to $75.98. Asian stock markets also dropped as investors worried about Iran’s response to the attacks. Iran has warned that US military bases in the region could be targets, adding to concerns about a bigger conflict.

US stock markets showed some stability despite global tensions, with S&P 500 futures falling just 0.5% and Nasdaq futures down 0.6%. In Asia, markets were mostly down -Tokyo’s Nikkei dropped 0.6%, Hong Kong slipped 0.4%, Seoul fell 0.7%, and Sydney declined 0.8%, while Shanghai remained mostly flat. A broader index of Asia-Pacific shares outside Japan also dropped 0.5%. European markets also opened weaker, with futures for EUROSTOXX 50, FTSE, and DAX falling between 0.5% and 0.7%.

Europe and Japan, being heavily dependent on imported oil and LNG, are feeling the pressure more than the US, which is a net energy exporter. In the commodities market, gold prices dipped slightly by 0.1% to $3,363 an ounce. The US dollar strengthened, rising 0.3% against the Japanese yen and pushing the dollar index up by 0.17%. The euro slipped 0.3% to $1.1481. Meanwhile, there was little movement toward US government bonds for safety, with 10-year bond yields rising slightly to 4.397%.

Markets are expected to remain volatile as fears grow that Iran could retaliate by closing the Strait of Hormuz,  a narrow but crucial waterway that handles about a quarter of global oil trade and 20% of liquefied natural gas shipments. Though Iran has previously threatened to block the strait, this time its parliament has reportedly approved such a move after the US targeted its nuclear sites. Some experts hope Iran might de-escalate or that a change in government could reduce tensions.

However, analysts at JPMorgan warned that past regime changes in the region have caused oil prices to surge by as much as 76%, and on average by 30%. Commodities analyst Vivek Dhar noted that instead of fully blocking the Strait of Hormuz, Iran might opt for limited disruptions to scare oil tankers- a move that could still drive Brent oil prices up to $100 a barrel.