In a tense market scenario, oil prices soared while stock values tumbled on Friday amid fears of global economic disruption following Israel’s military strikes on Iranian nuclear and military facilities. Investors worried that escalating Middle East tensions could constrict the flow of oil worldwide, destabilizing economies far beyond the region.
The stock market bore the brunt of these developments, with the S&P 500 plunging 1.1%, erasing a modest weekly gain. The Dow Jones Industrial Average plummeted by 769 points, a 1.8% fall, while the Nasdaq composite dropped 1.3%.
On the oil front, the price surged notably, with U.S. crude rising 7.3% to $72.98 per barrel, while Brent crude, a global benchmark, climbed 7% to $74.23. These spikes in oil prices are linked to fears surrounding potential disruptions in Iran, a significant oil producer whose operations are limited by Western sanctions. A broader conflict could hinder Iranian oil shipments, thus raising global crude and gasoline prices.
Moreover, there is a looming threat to the Strait of Hormuz, a crucial passage through which a large fraction of the world’s oil is transported. This potential jeopardy has previously caused temporary spikes in oil prices, usually subsiding once the situation stabilized and assured oil supplies remained uninterrupted, as noted by industry experts. Current tensions further eroded confidence on Wall Street, exacerbated by Iran’s retaliatory missile launches.
Despite oil price spikes, they remain below earlier peaks of the year. Economists like Brian Jacobsen from Annex Wealth Management warn that while the oil price hike presents an unwelcome economic jolt, it may affect market sentiment more than economic fundamentals. Meanwhile, U.S. stocks experienced a significant downturn yet remained outside the year’s most severe recessions.
This predicament hit fuel-reliant companies especially hard, with notable decreases for corporations such as cruise giant Carnival, which fell 4.9%, United Airlines declining 4.4%, and Norwegian Cruise Line Holdings dropping 5%. This offset gains for oil producers expected to benefit from the geopolitical tensions, like Exxon Mobil and ConocoPhillips, which rose by 2.2% and 2.4%, respectively.
Armament manufacturers also saw increased activity, with stocks like Lockheed Martin, Northrop Grumman, and RTX all experiencing rises greater than 3%. In a flight to safety, gold prices increased by 1.4% as investors sought more secure havens for their capital.
Contrary to usual trends during times of uncertainty, when Treasury prices typically increase due to their reputation as secure investments, Friday saw a downturn in Treasury prices, consequently elevating their yields due in part to concerns about potential inflationary pressures driven by oil price hikes. Inflation is near the Federal Reserve’s target, but additional pressures are anticipated from recent tariff implementations.
The 10-year Treasury yield rose to 4.41% from 4.36%, as higher yields can negatively impact stock prices and make borrowing costlier for businesses and individuals. Economic sentiment appeared buoyed by a report indicating improved consumer outlook, aligned with a potential pause on tariff enactments following elevated inflation expectations.
Adobe, despite beating profit expectations, saw a 5.3% decrease in its stock value—it seems investors were hoping for more ambitious revenue forecasts for the coming fiscal period.
Overall, market indicators fell significantly, with the S&P 500 dropping 68.29 points to 5,976.97, the Dow Jones Industrial Average plunging 769.83 to 42,197.79, and the Nasdaq composite declining 255.66 to 19,406.83.
International markets followed this downward trend, as exchanges in both Europe and Asia reported declines. France’s CAC 40 fell by 1%, and Germany’s DAX incurred a 1.1% drop, marking some of the more significant decreases abroad.