Stocks experienced a significant decline on Thursday, while oil prices surged amidst growing skepticism on Wall Street regarding a potential resolution to the U.S.-Israeli conflict with Iran. The S&P 500 plummeted by 1.7%, marking its worst performance since January and signaling a potential fifth consecutive weekly loss. This negative trend dates back to before the conflict initiated on February 28 and could constitute the lengthiest downward streak in almost four years.
The Dow Jones Industrial Average witnessed a decline of 469 points, equivalent to a 1% decrease, and the Nasdaq composite plunged by 2.4%, surpassing a 10% drop from its previous peak earlier this year, a threshold known as a “correction” in financial circles. Stock markets in Asia and Europe also registered sharp declines, reflecting the prevailing uncertainty that has characterized this week’s market fluctuations.
Initial optimism following statements by U.S. President Donald Trump suggesting progress in negotiations to end the conflict quickly faded as Iran refuted direct talks and dismissed a ceasefire proposal delivered through Pakistan. Consequently, ongoing hostilities persisted, with an increased deployment of U.S. troops to the region, while Iran tightened control over the crucial Strait of Hormuz.
This heightened tension contributed to a surge in Brent crude oil prices by 4.8%, settling at $101.89 US, as hopes for a swift resolution in the strait diminished. This price increase, up from approximately $70 before the conflict commenced, also impacted benchmark U.S. crude, which rose by 4.6% to $94.48 per barrel.
In response to the escalating situation, President Trump initially issued strong warnings to Iran on social media, emphasizing the need for prompt action. However, following the market close, he softened his stance, delaying potential military actions against Iran’s power plants and highlighting the ongoing positive trajectory of negotiations.
Consequently, oil prices slightly receded, with Brent crude edging back towards $100 per barrel. Meanwhile, fluctuations in Treasury yields, which surged to 4.43% from 4.33% on Thursday, have significant implications for the bond market and interest rates. This increase in rates could affect mortgages and other loans for U.S. households and businesses, potentially slowing economic growth.
Furthermore, a report indicated a marginal increase in U.S. unemployment benefit claims, although the overall number remained historically low. Despite expectations for interest rate cuts earlier in the year, concerns over inflation and the impact of rising oil prices have led to a shift in market sentiment, diminishing hopes for rate reductions.
Tech stocks faced significant declines on Wall Street, with Meta Platforms and Alphabet experiencing notable drops following legal challenges. This downward trend extended to other tech giants such as Nvidia and Amazon, while Apple managed a slight increase in its stock value.
Overall, the S&P 500 closed down by 114.74 points at 6,477.16, reflecting a 7.2% decline from its peak. The Dow Jones Industrial Average dropped by 469.38 points to 45,960.11, and the Nasdaq composite fell by 521.74 points to 21,408.08. International markets also witnessed losses, with declines in major indices in Germany, Hong Kong, South Korea, and Japan, mirroring the global uncertainty surrounding the geopolitical situation.