U.S. equities extended their declines on Friday as Wall Street concluded a fifth consecutive week in negative territory, marking its lengthiest downturn in nearly four years. The S&P 500 dropped 1.7%, marking its worst performance since the onset of conflict with Iran. The Dow Jones Industrial Average shed 793 points, or 1.7%, falling over 10% from its previous high set in the prior month, while the Nasdaq composite tumbled 2.1%.
The Dow’s slide now confirms a correction, defined as a 10% drop from a previous peak, following the Nasdaq’s similar move the day before. This week saw a departure from the back-and-forth trading pattern, with hopes for resolution in the conflict fluctuating daily.
Conversely, Canadian markets saw marginal gains, with the country’s main stock index edging slightly higher, supported by strength in the basic materials sector. The S&P/TSX composite index closed up 73.13 points at 31,960.65.
After the close of Thursday’s dismal trading session, U.S. President Donald Trump provided a glimmer of hope by extending the deadline for potential military action against Iran’s power facilities to April 6. This decision was contingent on Iran facilitating the passage of oil tankers through the Strait of Hormuz.
Following Trump’s announcement, oil prices briefly retreated, signaling optimism that normalcy could return to the Strait of Hormuz. However, prices rebounded as trading shifted from Asia to Europe and back to Wall Street.
Ongoing conflict in the Middle East persisted despite Trump’s postponements earlier in the week. Iran remained defiant, while Israel threatened to escalate its attacks. This diplomatic uncertainty weighed on investor sentiment, with global equity strategist Doug Beath noting that market confidence waned amid the war’s uncertainties.
Oil prices surged, with Brent crude climbing 3.4% to $105.32 per barrel, up from around $70 before the conflict began. U.S. crude also rose 5.5% to $99.64 per barrel. Concerns lingered that prolonged conflict could disrupt oil and gas production in the Persian Gulf, leading to inflationary pressures on a global scale.
Analysts at Macquarie warned that if the conflict persists until the end of June, oil prices could skyrocket to $200 per barrel, setting a new record. Market jitters were evident as most stocks, particularly tech giants like Amazon, Meta Platforms, and Nvidia, faced substantial declines. Non-essential consumer companies also suffered losses, with Norwegian Cruise Line Holdings, Starbucks, and Chipotle Mexican Grill experiencing significant drops.
Overseas, European markets followed Asia’s mixed performance with declines. In the bond market, Treasury yields fluctuated, with the 10-year Treasury yield reaching 4.48% before settling at 4.43%. These movements have already impacted mortgage and loan rates, potentially slowing economic growth. Rising Treasury yields, along with bond market disruptions, were cited by Trump last year when he backtracked on global tariff threats, citing concerns about market volatility.