Stocks on Wall Street tumbled Thursday following a surge in oil prices to levels not seen since the summer of 2024 due to the ongoing U.S.-Israeli conflict with Iran. The S&P 500 dropped 0.6%, wiping out its year-to-date gains. The Dow Jones Industrial Average briefly plummeted over 1,100 points before closing down by 1.6% or 784 points. The Nasdaq composite also slipped by 0.3%.
Financial markets worldwide are closely monitoring oil price movements, with concerns rising over the potential long-term impact on the global economy, consumer spending, and interest rates. Benchmark U.S. crude oil surged by 8.5% to $81.01 per barrel, while Brent crude, the international standard, climbed by 4.9% to $85.41 per barrel, nearing its highest price in years.
Although oil prices retraced some gains later in the day, anxiety persists over the duration of oil production disruptions amid escalating tensions with Iran. Gasoline prices in the U.S. have already increased, with the average price per gallon reaching $3.25, up nine percent from the previous week.
Analysts and investors warn that a further spike in oil prices, possibly reaching $100 per barrel, could strain the global economy. Market volatility has intensified, driven by uncertainty surrounding the conflict, with significant fluctuations occurring throughout the week.
The situation in the Strait of Hormuz, a crucial oil shipping route, remains a focal point, as disruptions could impact global oil supplies significantly. Despite the turbulence, historical trends suggest that the U.S. stock market tends to recover swiftly post-conflicts, provided oil prices do not escalate excessively. Professional investors advocate patience amid the market’s fluctuations.
Airlines suffered notable losses as higher oil prices escalated fuel costs, compounded by travel disruptions in the Middle East. American Airlines, United Airlines, and Delta Air Lines saw declines of 5.4%, five percent, and 3.9%, respectively. Small-cap stocks were also hit hard amid growing economic concerns and fears of rising interest rates, with the Russell 2000 index dropping by 1.9%.
While Asian markets rebounded after significant losses, European indexes declined as oil prices surged. South Korea’s Kospi recovered a substantial portion of its previous losses, jumping by 9.6%, while France’s CAC 40 and Germany’s DAX fell by 1.5% and 1.6%, respectively.