Stock markets experienced a significant decline on Thursday while oil prices saw an increase, reflecting a shift from optimism to uncertainty on Wall Street regarding the ongoing U.S.-Iran conflict. The S&P 500 fell by 1.7%, marking its most substantial daily drop since January and signaling a potential fifth consecutive week of losses, the longest streak in nearly four years.
The Dow Jones Industrial Average also faced a decline, dropping by 1%, while the Nasdaq composite plummeted by 2.4%, falling more than 10% below its previous record high earlier this year, a market correction in financial terms.
Global stock markets mirrored the downturn, with notable losses in Asia and Europe. This reversal follows a week of market volatility triggered by conflicting reports after U.S. President Donald Trump mentioned progress in peace talks with Iran. However, Iran denied direct negotiations and rejected a U.S. ceasefire proposal relayed through Pakistan.
Amidst the ongoing conflict, the Strait of Hormuz remains a focal point as Iran tightens control over the strategic waterway, potentially impeding the passage of oil tankers. As a result, Brent crude oil prices surged by 4.8% to $101.89 per barrel, indicating diminishing hopes for the strait’s normalization from its pre-war price of around $70. Similarly, benchmark U.S. crude rose by 4.6% to $94.48 per barrel.
In response to the situation, President Trump initially issued stern warnings to Iran on social media, but later announced a delay in potential military actions, extending the deadline for negotiations. This development led to a slight retreat in oil prices, with Brent crude edging back towards $100 per barrel. Concurrently, Treasury yields moderated after experiencing significant fluctuations in the bond market.
The bond market’s volatility and rising Treasury yields have raised concerns about their impact on the economy, reminiscent of past instances where Trump altered his trade policies due to market pressures. The yield on the 10-year Treasury surged to 4.43%, up from 4.33% the previous day and significantly higher than the pre-conflict rate of 3.97%. These fluctuations have already influenced mortgage rates and other loan costs, potentially dampening economic growth.
Tech stocks faced notable declines on Wall Street, with Meta Platforms and Alphabet leading the losses following legal issues. Other prominent tech companies, including Nvidia and Amazon, also saw declines. Commercial Metals reported weaker-than-expected profits, contributing to its stock decline.
Overall, the S&P 500 closed at 6,477.16, down by 114.74 points, while the Dow Jones Industrial Average and Nasdaq composite fell to 45,960.11 and 21,408.08, respectively. International markets also experienced losses, with indices like Germany’s DAX, Hong Kong’s Hang Seng, and South Korea’s Kospi posting declines. Japan’s Nikkei 225 saw a more modest decrease compared to other global markets.