Global markets drop as Middle East conflict pushes crude toward $100

Global markets retreated on Thursday, May 28, 2026, as renewed hostilities in the Middle East drove oil prices toward $100 and a downward revision of U.S. economic growth rattled investor sentiment. In London, the FTSE 100 share index dropped 0.9%, falling 91 points to 10,414, tracking losses across Asian exchanges where Hong Kong’s Hang Seng index dipped more than 1.5%. The volatility follows news of new American military strikes inside Iran and retaliatory drone attacks against Kuwaiti air defenses.

The escalation has reportedly clouded prospects for reopening the Strait of Hormuz, a conduit that is essential for global energy supplies. Brent crude gained 1.8% in Thursday morning trade to reach $95.95 a barrel, while West Texas Intermediate rose 1.7% to $90.17. Analysts note the conflict has “all but halted shipping through the crucial Strait of Hormuz for months,” a situation that continues to fuel global inflation concerns and energy price spikes.

The latest clashes involved American forces striking a control center in Bandar Abbas and downing four Iranian attack drones. While Tehran’s state media reported that Iranian forces fired at four ships in the Strait of Hormuz, the government in Kuwait named Iran as the culprit behind attempted missile and drone strikes against its territory. These geopolitical risks are unfolding as U.S. naval forces redirect commercial vessels to bypass the escalating maritime blockade.

Oil prices surge as Middle East hostilities intensify

Energy producers were among the few gainers in a broadly negative market on Thursday. In London, Shell rose 0.7% and BP added 0.4%, while weapons manufacturer BAE Systems climbed 1.3%. Investors are struggling to price in the duration of the conflict, particularly as initial hopes for a contained situation have been replaced by fresh uncertainty over shipping traffic and regional nuclear programs.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, observed that positive headlines now have less power to lift sentiment compared to the impact of setbacks. “Renewed hostilities and fresh uncertainty over key sticking points… have brought caution back to the fore,” Britzman stated. The cautious mood was also reflected in low-risk capital moves as capital continues to flow out of riskier assets like Bitcoin and into defensive equities.

The persistent energy shock has already left a mark on consumer data. Federal Reserve Chair Jerome Powell recently noted that while the full scope of the economic impact remains uncertain, rising energy prices are undeniably pushing up inflation estimates. These costs eventually filter down to households, with U.S. gas prices rising by an average of $1 per gallon in the month leading up to late March.

US growth revised down as inflation hits three-year high

Economic pressure in the United States intensified in April as the Personal Consumption Expenditures (PCE) price index, the central bank’s preferred inflation gauge, hit 3.8%. This represents the largest annual rise since May 2023. While energy costs drove much of this increase, price hikes were recorded across multiple spending categories. Core PCE, which excludes food and energy, also ticked upward to 3.3%.

The timing is particularly difficult for the Federal Reserve because U.S. growth figures were also revised downward on Thursday. This combination of slowing growth and rising costs suggests that interest rate cuts may be delayed until October. Heather Long, chief economist at Navy Federal Credit Union, warned that the current trend is unsustainable for lower-income and middle-class households as personal savings have cratered to 20-year lows.

Market performance across Asian and European exchanges

The bearish sentiment on May 28 extended deep into Asian trading. Markets in Seoul were down nearly 1%, while Shanghai ticked 0.3% lower. Tokyo’s Nikkei remained flat at the midday break, and Taipei provided a rare bright spot with its main index gaining more than 1%. Despite the turmoil, South Korean chipmaker SK hynix hit a $1 trillion market capitalization, underscoring the high demand for semiconductor infrastructure.

The long-term trend for major indices remains under pressure from the hostilities. By late March, the Dow Jones Industrial Average and the Nasdaq had already entered correction territory, having fallen more than 10% from their peaks. Persistent volatility in the Middle East remains the primary driver of these declines, with traders closely watching whether oil prices will breach the $100 threshold in the coming days.

UK youth unemployment crisis and domestic economic risks

While global focus remains on the Strait of Hormuz, the UK faces a distinct internal economic threat. A landmark report released today warns that the UK risks a £125 billion annual hit to its economy due to a surge in youth unemployment. The Office for National Statistics (ONS) reported that the number of young people between 16 and 24 not in education, employment, or training (Neets) has surpassed one million for the first time in over a decade.

Data from the ONS show that 1,012,000 young people were classified as Neet in the first quarter of 2026, a rise of 89,000 compared to the previous year. This brings the total to 13.5% of all young people in the country. Alan Milburn, who authored a review into the crisis, called the figures a “warning” and noted that the problem is worse in the UK than in many other countries.

The financial impact of this “lost generation” could hamper the country’s long-term productivity regardless of international trade stability. While TFI International reported valuation gains elsewhere in the logistics sector earlier this year, the domestic UK labor market appears to be struggling with rising costs and a widening skills gap. Business leaders have urged the government to act before the predicted £125 billion loss becomes an unavoidable reality.

The geopolitical and domestic challenges leave policymakers with few easy options. President Donald Trump has already issued a hardline ultimatum, threatening to “finish the job” if a peace deal is not reached. With the U.S. midterms approaching, the intersection of military escalation, slowing growth, and rising inflation will likely keep global markets in a state of high alert through the summer.