Stocks on Wall Street tumbled on Thursday as oil prices surged to their highest levels 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 earlier modest gains for the year. The Dow Jones Industrial Average experienced a brief 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 spike in oil prices, leading to concerns about potential long-term economic impacts, including decreased consumer spending, higher interest rates, and overall strain on the global economy. The price of benchmark U.S. crude surged by 8.5% to settle at $81.01 per barrel, while Brent crude, the global standard, rose by 4.9% to $85.41 per barrel, nearing its highest level in years.
Although oil prices retraced some of their gains later in the day, anxiety persisted over the duration of disruptions in oil production resulting from the escalating conflict with Iran. Gasoline prices in the U.S. have already climbed, with the average price per gallon reaching $3.25, a 9% increase from the previous week.
Analysts and investors are wary of further spikes in oil prices, with some suggesting that sustained levels at $100 per barrel could severely strain the global economy. Concerns about the impact on financial markets have led to volatile swings throughout the week, driven by uncertainties surrounding the conflict and its potential repercussions on global oil supply routes, particularly the Strait of Hormuz.
Despite the market turbulence, historical trends suggest that the U.S. stock market tends to rebound relatively quickly following geopolitical conflicts, provided that oil prices do not escalate excessively. Professional investors are advising patience and resilience amid the market fluctuations, anticipating a temporary increase in risk aversion until tensions subside.
While the S&P 500 has experienced notable fluctuations this week, it is down by only 0.7% thus far, buoyed by gains in tech and oil-related stocks. Airlines suffered significant losses as fuel costs surged, exacerbated by disruptions in the Middle East that impacted passenger travel. American Airlines, United Airlines, and Delta Air Lines all saw declines in their stock value.
Smaller companies were also adversely affected, a common trend during economic uncertainties and rising interest rates. The Russell 2000 index, comprising smaller stocks, led the market decline with a notable 1.9% drop. Internationally, Asian markets rebounded following previous losses, with South Korea’s Kospi recovering a significant portion of its previous day’s plunge. However, European markets faced declines as oil prices continued to rise, with France’s CAC 40 and Germany’s DAX both experiencing losses.