London (AFP) - Stock markets slumped as energy prices soared on Monday as supply disruptions from the Middle East war drove volatility and fanned inflation fears.

Oil prices rocketed above $100 a barrel for the first time since Russia’s invasion of Ukraine in 2022, after Iran retaliated to US-Israeli strikes by targeting sites in crude-producing Gulf nations.

After increasing by around 30 percent during Asian trading, international benchmark Brent and the main US oil contract WTI both pared gains and slid back under $100 per barrel.

The jump in prices was even more vertiginous than after Russia’s 2022 invasion of Ukraine, when oil touched $130.50 per barrel.

Iran marked the appointment of Ayatollah Mojtaba Khamenei to replace his father as its supreme leader with a new barrage of missiles against Israel and the Gulf states, adding to concerns about energy infrastructure as well as a long conflict.

“The overnight panic in oil has eased for now as the price reverses its madcap gains above $100 but the underlying reasons for the shock move remain in place,” said Chris Beauchamp, chief market analyst at online trading and investing platform IG.

“It is now open season on oil infrastructure across the region, which puts a near-term floor under the price well above the pre-war highs,” he said.

Brent is currently up around 38 percent from right before the war and up 64 percent from the start of the year.

WTI has climbed 43 percent since the eve of the war and 67 percent since the start of the year.

Iranian retaliatory attacks have all but halted maritime traffic through the Strait of Hormuz through which a fifth of global crude oil and liquefied natural gas pass.

Asian stocks fell sharply as oil prices spiked.

But equities in Europe and on Wall Street cut their losses as oil prices gave up their gains, even as G7 nations held off releasing oil from their strategic reserves.

The Nasdaq Composite even pushed higher in midday trading in New York.

Investors nevertheless remain worried that a spike in energy prices would trigger inflation and slow growth.

“The surge higher for the price of oil is significantly increasing stagflation risks for the global economy and could trigger a deeper sell-off in global equity markets,” said analyst Lee Hardman at Mitsubishi UFJ financial group

Stagflation refers to a period of high inflation coupled with economic stagnation.

Central banks are forced to raise interest rates to deal with inflation, thus hindering growth.

The prospect of interest rates being kept elevated, or even raised to combat inflation, pushed government bond yields higher on Monday.

Trade Nation analyst David Morrison noted that investors now expect just one interest rate cut from the US Federal Reserve this year, compared to two cuts just last week, while the European Central Bank is now tipped to hike rates sharply instead of holding them steady.

- Key figures at around 1630 GMT -

Brent North Sea Crude: UP 7.6 percent at $99.76 per barrel

West Texas Intermediate: UP 5.3 percent at $95.67 per barrel

New York - Dow: DOWN 0.8 percent at 47,141.95 points

New York - S&P 500: DOWN 0.3 percent at 6,717.96

New York - Nasdaq Composite: FLAT at 22,395.73

London - FTSE 100: DOWN 0.3 percent at 10,249.52 (close)

Paris - CAC 40: DOWN 1.0 percent at 7,915.36 (close)

Frankfurt - DAX: DOWN 0.8 percent at 23,409.37 (close)

Seoul - Kospi: DOWN 6.0 percent at 5,251.87 (close)

Tokyo - Nikkei 225: DOWN 5.2 percent at 52,728.72 (close)

Hong Kong - Hang Seng Index: DOWN 1.4 percent at 25,408.46 (close)

Shanghai - Composite: DOWN 0.7 percent at 4,096.60 (close)

Euro/dollar: DOWN at $1.1591 from $1.1604 on Friday

Pound/dollar: UP at $1.3396 from $1.3385

Dollar/yen: UP at 158.15 yen from 157.88 yen

Euro/pound: DOWN at 86.52 pence from 86.67 pence