US forces sank an Iranian frigate near Sri Lanka, the first torpedoing of an enemy ship since the second world war. Washington says the move deters further regional attacks, while shipping in the Indian Ocean and Gulf faces higher risk, prompting insurers and energy markets to brace for disruption.

Escalating tensions in the Middle East triggered an energy supply shock that hammered global markets. Equities fell and sovereign bonds swung as oil surged on risks to output and key routes. The upheaval raised inflation concerns and complicated central bank plans.

Energy markets jolted after Iran shifted focus to infrastructure, prompting the shutdown of a Qatari LNG plant following drone incidents. Gas prices jumped, risk premia rose for shipping and insurance, and traders moved to safe assets as Western forces continued regional operations.

Iran mounted retaliatory operations against Israel and US Gulf partners after the killing of Ayatollah Ali Khamenei, leaving three US troops dead and five injured. The US said its campaign is ahead of schedule, while disrupted shipping routes threaten higher global energy prices.