Stocks experienced a significant decline on Thursday while oil prices surged, reflecting a shift from optimism to uncertainty on Wall Street regarding the potential resolution of the U.S.-Iran conflict. The S&P 500 slumped 1.7%, marking its most substantial drop since January and heading for a fifth consecutive week of losses. This streak, dating back to before the conflict began on February 28, would be the longest in nearly four years.
The Dow Jones Industrial Average fell by 469 points, or 1%, and the Nasdaq composite plummeted by 2.4%, dropping over 10% below its previous record high earlier this year, a level classified as a “correction” by professional investors. Stock markets in Asia and Europe also experienced declines, reflecting the turbulent week in financial markets.
Following initial hopes sparked by U.S. President Donald Trump’s comments on progress in resolving the conflict, the situation took a turn as Iran refuted direct talks and rejected a U.S. ceasefire proposal transmitted through Pakistan. The ongoing conflict, coupled with the escalation of U.S. troop presence and Iran’s control over the critical Strait of Hormuz, contributed to the market volatility.
The price of Brent crude oil surged by 4.8% to reach $101.89 per barrel, indicating dimmed prospects for a swift resolution at the Strait of Hormuz, compared to the pre-conflict level of around $70 per barrel. Similarly, benchmark U.S. crude rose by 4.6% to $94.48 per barrel.
President Trump’s statements initially indicated a firm stance towards Iran, but later, he delayed his threat of striking Iranian power plants, allowing more time for negotiations. This shift in tone led to a slight retreat in oil prices towards $100 per barrel. Moreover, Treasury yields, which had surged in response to the conflict, also moderated, easing concerns in the bond market.
The spike in Treasury yields, reaching 4.43% on Thursday from 3.97% prior to the conflict, raised apprehensions about its impact on mortgages and other loans, potentially slowing down the economy. Despite the possibility of a weakening job market prompting interest rate cuts by the Federal Reserve, the current inflation concerns and oil price surge have dampened expectations for rate cuts in 2026.
Tech stocks faced significant declines on Wall Street, with Meta Platforms and Alphabet experiencing notable drops following legal challenges. Other tech giants like Nvidia and Amazon also recorded losses, while Apple managed a marginal gain. In addition, Commercial Metals reported lower-than-expected profits, leading to a decline in its stock value.
Overall, the S&P 500 closed at 6,477.16, down 114.74 points, representing a 7.2% decline from its recent peak. The Dow Jones Industrial Average and the Nasdaq composite also registered losses, reflecting the global trend of market downturns in major economies like Germany, Hong Kong, South Korea, and Japan.