(Bloomberg) — Escalating hostilities in the Middle East and widening stress on oil shipping and infrastructure had global investors braced for more turbulence when trading resumes Sunday.

As morning dawned in Asia, the dollar — a beneficiary of the crisis so far because of its haven status — started off strong against major peers in Sydney trading. Stock and bond futures open at 6 p.m. New York time.

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With the conflict now in its second week, energy disruptions remained the presiding worry after the United Arab Emirates and Kuwait joined Iraq in reducing oil production as storage filled up and tankers continued to avoid the critical Strait of Hormuz. Brent crude climbed some 30% last week — its biggest jump in six years — leaving it above $90 a barrel.

“Markets had held up better than you might expect through the initial shock, but damage to oil infrastructure changes the equation,” said Dave Mazza, chief executive officer at Roundhill Financial. “This is no longer just about Hormuz being effectively shut, it is about supply disruption spreading deeper into the region, and that is the kind of shift that can push already-nervous investors to take more risk off the table.”

Overnight Sunday, Iran pressed attacks on Mideast neighbors, pushing the war into a ninth day, while Israel struck fuel depots in Tehran and threatened the Islamic Republic’s power grid. President Donald Trump warned the US would consider targeting areas that weren’t previously aimed for. The attacks will continue “until they surrender or, more likely, completely collapse!” he said in a social media post. Iran, meanwhile,

Selling swept across regions and asset classes last week as the geopolitical flareup added fresh stress to markets that are already under pressure from AI disruptions and worries about the potential for cracks in credit markets. US bonds dropped the most since last year’s “Liberation Day” tariffs rout, and the S&P 500 suffered its largest weekly loss since October. Emerging-market equities slid more, posting their biggest slump since 2020.

With inflation stuck above the Fed’s 2% target, bond traders had been scaling back expectations for cuts this year even before the conflict started, while pushing bets for deeper easing into 2027 should a slowdown materialize. The war prompted some traders to bet on no cuts at all in 2026, though an unexpectedly weak US employment report Friday pushed the consensus back closer to expecting as many as two quarter-point cuts this year.

Funds that are designed to weather shocks, such as trend following and risk parity, got hit. The RPAR Risk Parity ETF, for instance, slipped more almost 4%, its worst return in more than three years.

Worst to Come?

Signs of angst are deepening. The Cboe Volatility Index, a gauge of implied price swings in the S&P 500 known as the VIX, surged toward 30 on Friday, pushing the spot price above its three-month futures in the largest inversion in almost a year.

“The worst is yet to come in the stock market reaction,” said Michael O’Rourke, chief market strategist at  JonesTrading. “I would expect more of a risk-off mood until we get some tangible positive news.”

In the credit market, the premium investors demand for owning investment-grade bonds over Treasuries widened to a three-month high. Meanwhile, hedge funds have slashed their net exposure to levels not seen since 2022, according to data compiled by PivotalPath.

Despite the rising worries, some market watchers caution against taking too bearish a stance, given the chance for a de-escalation of hostilities or fresh avenues of diplomacy, with the Trump administration sensitive to market swings.

“You don’t want just sell everything because you think this is going on forever,” said Nicholas Colas, co-founder of DataTrek Research. “This current administration is very sensitive prices and if things get too volatile, then they will adapt.”

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