Oil prices reach highest level since summer 2024 amid war in Iran
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Stocks sank on Wall Street on Thursday after oil prices rose to their highest level since summer 2024 due to the US-Israel war with Iran.
The S&P 500 fell 0.6 percent and erased small gains for the year so far. The Dow Jones Industrial Average briefly fell more than 1,100 points before ending the day with a loss of 784, or 1.6 percent. The Nasdaq Composite slipped 0.3 percent.
The losses came as financial markets around the world continued to follow oil price cues. The rapid growth is raising concerns that a prolonged boom could overwhelm the global economy, eroding households’ spending power and sending interest rates higher.
The price of a barrel of benchmark US crude oil rose 8.5 percent to $81.01 a barrel on Thursday. International benchmark Brent crude rose 4.9 percent to $85.41 a barrel and is close to its highest price since 2024.
Oil prices gave back some gains later in the day, helping US stocks par their losses at the end of trading. But concerns remain about how long the disruption in oil production will last due to the escalating war with Iran.
Prices at American gasoline pumps have already increased because of them. According to auto club AAA, the average price of a gallon is $3.25, up nine percent from $2.98 a week ago.
If oil prices rise further, say to $100 a barrel, and stay there, some analysts and investors say it may be too much for the global economy to bear. Financial markets have seen occasional hour-to-hour volatility this week due to uncertainty about what will happen.
A lot will depend on what happens with the Strait of Hormuz. About a fifth of the world’s oil typically passes through the narrow waterway off Iran’s coast.
To be sure, the U.S. stock market has a history of bouncing back relatively quickly after conflicts in the Middle East and elsewhere, as long as oil prices don’t jump too high for too long. Many professional investors are suggesting to be patient and deal with the ups and downs of the market.
“While risks to further upside remain, we think the more likely outcome is an increase in market risk aversion that only lasts a short time until investors tone down the hostility,” said Scott Wren, senior global markets strategist at Wells Fargo Investment Institute.
Despite the sharp fluctuations, the S&P 500 is down just 0.7 percent so far for the week, as gains in Big Tech stocks and oil producers have helped offset losses in the rest of the market.
Airlines stocks fell again on Thursday in the US market’s biggest decline. High oil prices are increasing their already huge fuel bills, while war has stranded hundreds of thousands of travelers across the Middle East. American Airlines lost 5.4 percent, United Airlines lost five percent and Delta Airlines lost 3.9 percent.
Meanwhile, shares of smaller companies took a huge hit. This is normal when there are increasing concerns about the strength of the economy and rising interest rates. The market-leading Russell 2000 index of the smallest stocks fell 1.9 percent.
In stock markets overseas, indices in Asia rose after historic losses a day earlier. South Korea’s Kospi rose 9.6 percent to recover from Wednesday’s 12.1 percent fall, its worst fall ever.
But as oil prices began to rise, indices in Europe fell. France’s CAC 40 fell 1.5 percent, and Germany’s DAX fell 1.6 percent.
