Stocks on Wall Street tumbled as oil prices surged to their highest level since 2024 due to the U.S.-Israeli conflict with Iran. The S&P 500 dropped by 0.6%, wiping out its year-to-date gains. The Dow Jones Industrial Average briefly plummeted over 1,100 points before closing with a 1.6% loss, while the Nasdaq composite slipped 0.3%.
Global financial markets reacted to the spike in oil prices, sparking concerns that prolonged increases could negatively impact the global economy, strain consumer spending, and lead to higher interest rates. Benchmark U.S. crude prices surged by 8.5% to $81.01 per barrel, while Brent crude, the international standard, climbed 4.9% to $85.41 per barrel, nearing its 2024 peak.
Although oil prices retreated slightly later in the day, fears persisted over potential disruptions to oil production amid the escalating conflict with Iran. This uncertainty has already driven up gasoline prices in the U.S., with the average cost per gallon reaching $3.25, a 9% increase from the previous week, according to AAA.
Analysts and investors warn that if oil prices continue to rise, reaching $100 per barrel and remaining at that level, it could strain the global economy. The Strait of Hormuz, through which a significant portion of the world’s oil passes, remains a critical focal point amidst the ongoing conflict.
Despite the market volatility, history suggests that the U.S. stock market typically rebounds swiftly following geopolitical tensions, provided oil prices do not skyrocket for an extended period. Professional investors advise patience during these turbulent times, emphasizing the importance of monitoring developments and maintaining a long-term perspective.
In Thursday’s trading session, airline stocks faced significant losses as higher oil prices added to their operational costs, compounded by disruptions in travel due to the conflict. American Airlines dropped by 5.4%, United Airlines by 5%, and Delta Air Lines by 3.9%. Smaller companies also bore the brunt of economic concerns, with the Russell 2000 index, representing small-cap stocks, declining by 1.9%.
While Asian markets rebounded following previous losses, European indexes declined as oil prices surged. South Korea’s Kospi surged by 9.6%, recovering from a record 12.1% drop, while France’s CAC 40 and Germany’s DAX fell by 1.5% and 1.6%, respectively.