Stocks fell and oil prices surged Thursday as the war with Iran continued to stoke fears of higher energy costs and disruptions to the global economy.
The major US stock indexes were down 1% or more, extending a recent bout of volatility. The Dow fell 655 points, or 1.38%. The S&P 500 was down by 1.3%, and the tech-heavy Nasdaq Composite sank 1.66%.
US crude oil prices surged 9.8%, to $95.83 per barrel. Brent crude, the international oil benchmark, rose 9.3%, to $100 per barrel.
Oil prices climbed as Iran’s new supreme leader Mojtaba Khamenei issued his first public message, warning that the crucial Strait of Hormuz will remain closed as a “tool of pressure.” The message, read on Iran’s state television by an anchor, also said that all US bases in the region “will be attacked” unless they shut down.
The Strait of Hormuz, the vital waterway off Iran’s coast through which 20% of global oil consumption flows, has been effectively closed since the war began. That has sent oil prices soaring and dimmed the outlook for stocks across the globe.
“The implicit closure of the Strait of Hormuz remains the hinge factor for global markets,” Felix Vezina-Poirier, chief strategist at BCA Research, said in a note.
The Strait of Hormuz has become a flashpoint in the war, with US officials demanding it reopens and the Iranian regime doubling down on preventing business as usual.
US Energy Secretary Chris Wright said Thursday that the strait must ultimately reopen as the United States continues military operations in Iran.
“Now the Strait of Hormuz needs to be and will be reopened,” Wright said on “CNN News Central.”
Meanwhile, the International Energy Agency said in its monthly oil report Thursday that the Middle East conflict is “creating the largest supply disruption in the history of the global oil market.”
US Treasury yields moved higher as investors recalibrated expectations for potentially higher inflation caused by higher energy prices. The 10-year yield rose to 4.24%, its highest level since early February.
The US dollar strengthened against other major currencies, benefitting from safe haven demand. The US dollar index was up 0.4%, hitting its highest level this year.
Wall Street’s fear gauge, the VIX, jumped 9%, reflecting the heightened volatility in markets. CNN’s Fear and Greed Index slipped into “extreme fear.”
“For now, oil remains the primary market driver, with developments around the reopening of the Strait of Hormuz acting as either an accelerator or a brake on risk appetite,” Adam Turnquist, chief technical strategist at LPL Financial, said in a note.
By CNN
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