Oil prices jumped back to around $100 per barrel and global stock markets slid Thursday as investors weighed how the Iran war could disrupt oil flows from the Persian Gulf and keep inflation elevated.
The S&P 500 fell 1.5% as markets resumed sharp swings after a couple of days of relative calm, while the Dow Jones Industrial Average dropped 739 points, or 1.6%, and the Nasdaq composite fell 1.8%. Trading across the major indexes moved in step with oil, where the price of Brent crude climbed 9.2% to settle at $100.46.
Anxiety centered again on the oil market as fears intensified that the war could block production in the Persian Gulf for a long time and contribute to a debilitating surge of inflation for the global economy. The risks looked especially acute because Iran’s leadership signaled it would keep up pressure in the region, including through leverage linked to the Strait of Hormuz.
Iran’s new supreme leader issued his first statement Thursday since succeeding his late father, saying the country would keep up attacks on Gulf Arab neighbors and use the effective closure of the Strait of Hormuz as leverage against the United States and Israel. The Strait of Hormuz typically carries about a fifth of the world’s oil, and AP reported that oil producers in the region were cutting production because their crude had nowhere to go.
The International Energy Agency said Wednesday that its members would release a record amount of oil—400 million barrels—from stockpiles built for such emergencies. Still, AP reported that such moves were short-term fixes that did not clear the long-term risk, including the possibility that prices could jump further if the strait remained closed.
Analysts cited by AP said that if the Strait of Hormuz stays closed, oil prices could rise to $150. In the stock market, the reaction came as traders also looked at the broader economic backdrop, where worries about “stagflation” had been raised by weak employment data.
AP said last month’s hiring by U.S. employers was unexpectedly weak, prompting concerns about a worst-case scenario in which growth stagnates while inflation remains high. Thursday brought a more encouraging signal for labor, with a report saying the number of U.S. workers applying for unemployment benefits inched lower last week, a sign that layoffs might be remaining low in multiple parts of the country.
Earnings and guidance updates added to the day’s stock-specific moves. Dollar General reported better profit and revenue than analysts expected for the latest quarter, but its forecasts for revenue this upcoming year indicated a potential slowdown in growth, and its stock fell 6.1%. Companies with large fuel bills also struggled, with Carnival down 7.9% and United Airlines down 4.6%.
AP also said worries about the private-credit industry continued to weigh on markets as investors pulled money from some funds and companies that have lent to businesses facing profit threats. It cited the impact on Morgan Stanley, saying the firm fell 4.1% after its North Haven Private Income Fund allowed investors to redeem 5% of total shares rather than nearly 11% of shares investors had requested, with the 5% cap described as the advertised limit.
Across global markets, indexes fell in Europe and Asia, including Japan’s Nikkei 225 down 1% and France’s CAC 40 down 0.7%. In the bond market, Treasury yields kept rising as oil-price pressure fed through to rates, with the 10-year Treasury yield rising to 4.26% from 4.21% late Wednesday and from just 3.97% before the war started.
Higher yields make borrowing more expensive for households and businesses, and AP said traders pushed back forecasts for when the Federal Reserve could resume interest-rate cuts. It also noted that President Donald Trump has been calling angrily for such cuts, which could boost the economy and job market while also potentially worsening inflation.
By the end of Thursday’s session, AP reported that the S&P 500 fell 103.18 points to 6,672.62, the Dow dropped 739.42 points to 46,677.85, and the Nasdaq sank 404.16 points to 22,311.98. In commodities, benchmark U.S. crude rose 9.7% to settle at $95.73.
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