Global financial markets experienced significant volatility Monday as investors reacted to President Trump’s announcement of a naval blockade on Iran’s ports. The Dow Jones Industrial Average dropped more than 500 points in pre-market trading, while oil prices surged to their highest levels in months.

Brent crude oil jumped 8.3% to $98.75 per barrel, while West Texas Intermediate (WTI) rose 7.8% to $94.20. The price spike reflects growing concerns about potential supply disruptions in the Strait of Hormuz, through which approximately 21 million barrels of oil pass daily.

“This is a classic supply shock scenario,” said Maria Chen, chief energy analyst at Global Markets Research. “If the blockade persists for more than a few weeks, we could see oil prices climb well above $100 per barrel, with devastating consequences for the global economy.”

Energy stocks were among the few bright spots in an otherwise bleak trading session. ExxonMobil and Chevron both gained more than 4%, while smaller exploration companies saw even larger gains. Conversely, airline stocks plummeted as investors priced in higher fuel costs.

The S&P 500 fell 0.56% to 6,816.89, while the Nasdaq managed a modest gain of 0.35% to 22,902.90, driven by strength in technology shares. The Russell 2000 small-cap index declined 0.22% to 2,630.59.

Bond markets also reacted to the news, with investors flocking to safe-haven assets. The yield on 10-year U.S. Treasury notes fell 8 basis points to 4.12%, while gold prices rose 2.1% to $2,340 per ounce.

Central banks around the world are now facing a difficult dilemma. The surge in oil prices threatens to reignite inflation just as policymakers were preparing to cut interest rates. The Federal Reserve, which meets next week, may be forced to maintain its hawkish stance longer than previously anticipated.

“This complicates the inflation picture significantly,” said former Fed economist David Walsh. “Energy prices feed into everything from transportation to manufacturing. We could see core inflation tick back up just when we thought we had it under control.”

Analysts at Goldman Sachs raised their year-end oil price forecast to $105 per barrel, citing the heightened geopolitical risk premium. They also warned that a complete closure of the Strait of Hormuz could push prices as high as $150 per barrel.