Oil Spikes, USD/JPY Hits 40-Year High as Red Sea Conflict Widens

Oil prices are ramping sharply higher as the Middle East conflict expands into the Red Sea, forcing commercial vessels to reroute and worsening the global supply outlook. Iran claims to have struck US military facilities in Jordan and Bahrain, while disruptions at both the Strait of Hormuz and Red Sea shipping lanes are compounding supply fears. USD/JPY has surged to a fresh 40-year high, reflecting both broad dollar strength and persistent yen weakness, with Bank of Japan officials noting concern over the yen's rapid depreciation. Gold is staging a major bullish reversal, underscoring the intense risk-off environment. US equity futures are edging lower as big tech earnings approach, adding to the cautious tone. For forex traders, the combination of surging oil prices, geopolitical escalation, and central bank divergence between the Fed and BoJ makes USD/JPY the key pair to watch. Commodity-linked currencies face a tug-of-war between higher energy prices and deteriorating risk sentiment. Traders should prepare for elevated volatility across all major pairs.