Stocks on Wall Street plunged on Thursday as oil prices surged to their highest levels since the summer of 2024 due to the 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 experienced a brief plunge of over 1,100 points before closing the day with a 1.6% loss of 784 points. The Nasdaq composite also slipped by 0.3%.
Global financial markets continued to track oil price movements closely. Concerns are mounting over the potential long-term impact of significant oil price increases on the global economy, consumer spending capacity, and interest rates. Benchmark U.S. crude oil prices surged by 8.5% to $81.01 per barrel, while Brent crude, the international standard, rose by 4.9% to $85.41 per barrel, nearing its highest level in years.
Although oil prices retreated slightly later in the day, easing losses in U.S. stocks by the closing bell, apprehensions persist regarding the duration of oil production disruptions due to the escalating conflict with Iran. Gasoline prices in the U.S. have already risen, with the average price per gallon reaching $3.25, a 9% increase from the previous week.
Analysts and investors are wary of the potential consequences if oil prices continue to climb, with some suggesting that sustained prices at $100 per barrel could strain the global economy. The uncertainty surrounding the situation has led to volatile swings in financial markets, reflecting concerns about the impact on global oil supply routes, particularly the critical Strait of Hormuz.
Despite the ongoing market turbulence, professional investors point to historical trends of swift rebounds in the U.S. stock market following geopolitical conflicts, as long as oil prices remain within manageable levels. Big Tech and oil producer stocks have partly offset losses, helping limit the S&P 500’s weekly decline to 0.7%.
Airlines stocks faced significant declines as higher oil prices escalated fuel costs, compounded by disruptions affecting passengers 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 bore the brunt of economic concerns and rising interest rates, with the Russell 2000 index witnessing a notable 1.9% drop.
In international markets, Asian indexes rebounded following previous losses, with South Korea’s Kospi surging by 9.6% to recover a substantial portion of its record 12.1% drop from the prior day. However, European markets retreated as oil prices surged, with France’s CAC 40 falling by 1.5% and Germany’s DAX losing 1.6%.