Stocks on Wall Street plummeted 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 modest year-to-date gains. The Dow Jones Industrial Average experienced a temporary plunge of over 1,100 points before closing with a 1.6% loss, while the Nasdaq composite slipped by 0.3%.
Global financial markets are closely monitoring oil price movements, fearing that a sustained increase could negatively impact the worldwide economy, strain consumer spending, and lead to higher interest rates. Benchmark U.S. crude jumped by 8.5% to $81.01 per barrel, while Brent crude, the international standard, rose by 4.9% to $85.41 per barrel, nearing its highest level in years.
Although oil prices retraced some gains later in the day, concerns persist about prolonged disruptions in oil production amid escalating tensions with Iran. Gasoline prices in the U.S. have already surged, with the average price per gallon reaching $3.25, a 9% increase from the previous week.
Analysts and investors warn that a further spike in oil prices, potentially reaching $100 per barrel, could have severe repercussions on the global economy. Uncertainty surrounding the situation has led to volatile swings in financial markets, with much hinging on developments in the crucial Strait of Hormuz, a vital oil shipping route.
Despite the market turbulence, some experts remain optimistic, citing historical resilience in the face of geopolitical conflicts. The S&P 500 is down by only 0.7% for the week, supported by gains in tech and oil stocks, which have offset losses in other sectors.
Airline stocks took a hit, with higher oil prices exacerbating fuel expenses and travel disruptions in the Middle East. Major carriers like American Airlines, United Airlines, and Delta Air Lines saw significant declines. Smaller company stocks also suffered, reflecting concerns about economic strength and potential interest rate hikes, as evidenced by the Russell 2000 index’s 1.9% drop.
While Asian markets rebounded from previous losses, European indexes declined as oil prices surged. South Korea’s Kospi recovered much of its previous day’s losses, while France’s CAC 40 and Germany’s DAX both recorded losses amid the escalating oil price environment.