Stocks on Wall Street experienced a sharp decline on Thursday as oil prices surged to their highest level 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 previous modest gains for the year. The Dow Jones Industrial Average initially plummeted over 1,100 points but closed with a 1.6% loss of 784 points. Similarly, the Nasdaq composite slipped by 0.3%.
Global financial markets reacted to the spike in oil prices, sparking concerns about potential long-term economic impacts, including reduced consumer spending and higher interest rates. The price of U.S. benchmark crude oil rose by 8.5% to $81.01 per barrel, while Brent crude climbed 4.9% to $85.41 per barrel, nearing its highest level in years.
Although oil prices retreated slightly later in the day, anxiety persisted over prolonged disruptions to oil production amid escalating tensions with Iran. This uncertainty has led to fluctuations in financial markets, with some analysts warning that a further spike in oil prices, particularly to $100 per barrel, could strain the global economy.
The Strait of Hormuz, a critical oil shipping route, remains a focal point as disruptions could impact a significant portion of global oil supply. Despite the market volatility, professional investors advise patience and anticipate a potential decrease in risk aversion once hostilities subside.
Airlines stocks faced significant losses as higher oil prices inflated fuel costs, compounded by disruptions affecting passenger travel in the Middle East. Major airlines such as American Airlines, United Airlines, and Delta Air Lines saw their stocks decline. Smaller companies also experienced substantial losses amid growing economic concerns and fears of rising interest rates, with the Russell 2000 index leading the decline by 1.9%.
While Asian markets rebounded following previous losses, European markets saw declines as oil prices surged. South Korea’s Kospi recovered much of its previous drop, while France’s CAC 40 and Germany’s DAX both registered losses.