Stocks experienced a significant decline on Thursday, accompanied by a rise in oil prices, as optimism dwindled 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 possible fifth consecutive week of losses. This losing streak, dating back to before the war commenced on February 28, could be the lengthiest in nearly four years.
The Dow Jones Industrial Average saw a decline of 469 points (1%), while the Nasdaq composite dropped by 2.4%, falling more than 10% below its previous record high earlier this year, indicating a significant correction in the market. Stock markets in Asia and Europe also experienced sharp declines, reflecting the uncertainty prevailing in financial markets.
The ongoing turmoil was exacerbated by Iran’s continued defiance and the escalation of military actions, as thousands of additional U.S. troops approached the region, while Iran tightened control over the vital Strait of Hormuz. This key waterway, responsible for a significant portion of global oil transportation, could potentially face disruptions, impacting oil prices. Brent crude oil prices surged by 4.8% to $101.89 per barrel, reflecting diminishing hopes for a swift resolution to the crisis.
President Trump’s statements further added to the market volatility. Initially issuing strong warnings to Iran, he later softened his stance, delaying potential actions. This change in rhetoric led to some stabilization in oil prices and bond market yields, which had soared significantly amid the uncertainty.
The spike in Treasury yields, reaching 4.43%, from 3.97% before the conflict, could have wider implications for the economy, affecting mortgage rates and loans. The possibility of a slower job market and concerns over inflation have tempered expectations of interest rate cuts by the Federal Reserve, leading to apprehensions among traders and investors.
Tech stocks bore the brunt of the market downturn, with Meta Platforms and Alphabet witnessing substantial declines. Legal challenges and regulatory concerns surrounding social media companies contributed to the negative sentiment. Commercial Metals also reported weaker-than-expected profits, attributing the shortfall to adverse weather conditions.
Overall, the S&P 500 closed at 6,477.16, down 7.2% from its peak, while the Dow Jones Industrial Average and Nasdaq composite ended at 45,960.11 and 21,408.08, respectively. Global markets mirrored the trend, with notable losses in Germany’s DAX, Hong Kong’s Hang Seng, and South Korea’s Kospi indices. Japan’s Nikkei 225 recorded a comparatively milder decline of 0.3%.