Global stock markets experienced a sell-off on Tuesday, with Wall Street also being impacted, although losses lessened as the day progressed. Oil prices surged amid concerns over the escalating conflict with Iran.
The S&P 500 initially fell by 2.5% due to fears that the war could have a more significant long-term impact on the economy. However, the index recovered slightly, ending the day down by 0.9%. The Dow Jones Industrial Average dropped by 0.8%, shedding 403 points after a morning plunge of over 1,200 points. The Nasdaq composite reduced its losses to 1%.
Oil prices surged as Iran targeted the U.S. Embassy in Saudi Arabia, raising concerns about key oil and gas production regions. Brent crude briefly surpassed $84 per barrel but settled at $81.40, marking a 4.7% increase. Benchmark U.S. crude rose by 4.7% to $74.56 per barrel.
There is significant apprehension regarding the impact on the Strait of Hormuz, a critical passage where approximately 20% of the world’s oil transits. The situation remains uncertain, with concerns about the duration of the conflict affecting market stability.
Commenting on the situation, Thomas Hayes, chairman of Great Hill Capital, highlighted the unforeseen variables impacting the market, including Iran’s attacks and the implications of the closed Strait of Hormuz on energy prices and inflation.
The jump in oil prices is expected to worsen inflation, increasing costs for gasoline and shipping. The average U.S. gasoline price surged by 11 cents overnight to around $3.11 per gallon. Companies heavily reliant on oil and gas are bearing the brunt of the market downturn.
In South Korea, the Kospi index plummeted by 7.2%, its most significant drop in years, while Japan’s Nikkei 225 fell by 3.1%. Airline stocks suffered due to rising fuel costs and flight disruptions, with American Airlines and United Airlines experiencing declines.
Wall Street saw widespread losses, with the majority of S&P 500 stocks declining. Big Tech stocks failed to boost indexes, with Nvidia falling by 1.4%. Target was a rare gainer, rising by 6.5% following better-than-expected quarterly profits.
Amid inflation concerns, Treasury yields rose, with the 10-year Treasury yield climbing to 4.10%. Higher yields could lead to increased borrowing costs for households and businesses, impacting various financial instruments.