Stocks tumbled on Wall Street on Thursday as oil prices surged to their highest level since the summer of 2024 due to the ongoing U.S.-Israeli conflict with Iran. The S&P 500 dropped by 0.6%, wiping out its modest year-to-date gains. The Dow Jones Industrial Average saw a temporary plunge of over 1,100 points before closing with a 1.6% loss, while the Nasdaq composite slipped by 0.3%.
Global financial markets continued to react to the rising oil prices, sparking concerns about potential long-term economic impacts, reduced consumer spending capacity, and higher interest rates. The price of U.S. benchmark crude oil surged by 8.5% to $81.01 per barrel, while the international standard, Brent crude, climbed 4.9% to $85.41 per barrel, nearing its highest price in years.
Despite some retracement in oil prices later in the day, anxiety remains high over the duration of oil production disruptions due to the escalating conflict with Iran. This disruption has already led to increased gasoline prices in the U.S., with the average gallon cost reaching $3.25, a 9% increase from the previous week’s $2.98.
Market analysts and investors fear that further spikes in oil prices, potentially reaching $100 per barrel, could strain the global economy. The uncertainty surrounding the conflict has caused volatile market swings, with much hinging on developments in the vital oil shipping route through the Strait of Hormuz, where a significant portion of the world’s oil passes.
While acknowledging the historical resilience of the U.S. stock market following geopolitical conflicts, many experts advise caution and patience amid the current turmoil. Professional investors suggest weathering the market fluctuations, anticipating a decrease in risk aversion once hostilities show signs of easing.
Airlines’ stocks faced significant declines, with higher oil prices compounding their fuel expenses, and flight disruptions leaving numerous passengers stranded in the Middle East. American Airlines, United Airlines, and Delta Air Lines saw declines of 5.4%, 5%, and 3.9%, respectively. Smaller companies also suffered as concerns grew about economic strength and potential interest rate hikes, with the Russell 2000 index experiencing a notable 1.9% drop.
While Asian markets rebounded after significant losses, European indexes dipped as oil prices accelerated. South Korea’s Kospi posted a notable 9.6% gain following a previous 12.1% drop, while France’s CAC 40 and Germany’s DAX fell by 1.5% and 1.6%, respectively.
