Dow plunges over 1,000 points as oil prices surge amid Iran war

The Dow Jones Industrial Average dropped more than 1000 points Thursday after the price of oil spiked to its highest level since the summer of 2024 because of the war with IranThe Dow sank 1066 points or 22 per cent and its steep losses accelerated through the day The SampP 500 which is the measure of the US stock market that many more 401k accounts follow fell 12 per cent while the Nasdaq composite was down 11 per cent with roughly an hour remaining in tradingThe selloff came as worldwide financial markets again followed the cue of oil prices Sharp increases there are raising worries that a longterm spike could exhaust households ability to spend grind down the global economy and push interest rates higherThe price for a barrel of benchmark US crude shot up 85 per cent to settle at USD 8101 per barrel Brent crude the international standard climbed 49 per cent to USD 8541 per barrel and is also near its highest price since two summers agoThe jumps came after Iran launched a new wave of attacks against Israel American bases and countries around the region The wars escalation is raising worries about how long disruptions will last in the region for the production and transport of oil and natural gasPrices at US gasoline pumps have already jumped because of them The average price for a gallon is USD 325 up 9 per cent from USD 298 a week ago according to auto club AAATo be sure the US stock market has a history of bouncing back relatively quickly following conflicts in the Middle East and elsewhere That has many professional investors suggesting patience and riding through the markets swingsWhile further escalation remains a risk we think the more likely outcome is an increase in market risk aversion that likely lasts only a short time until investors can see a winding down of hostilities according to Scott Wren senior global market strategist at Wells Fargo Investment InstituteBut if oil prices spike like to USD 100 per barrel and stay there it could be too much for the global economy to withstand Uncertainty about that has caused frenetic swings across financial markets this week sometimes hour by hourMuch will depend on what happens with the Strait of Hormuz Roughly a fifth of the worlds oil typically sails through the narrow waterway off Irans coastStocks of airlines fell to some of the US markets worst losses on Thursday Higher oil prices are increasing their already big fuel bills while the war has left hundreds of thousands of passengers stranded across the Middle East American Airlines lost 64 per cent United Airlines fell 66 per cent and Delta Air Lines sank 48 per centStocks of smaller companies meanwhile took heavy hits Thats typical when worries are growing about the strength of the economy and about interest rates rising The Russell 2000 index of the smallest stocks fell a marketleading 27 per centWall Streets drop would have been worse if not for Broadcom The chip companys stock rose 29 per cent after it reported stronger profit and revenue for the latest quarter than analysts expected Its one of Wall Streets most influential stocks because its one of the biggest by total value and CEO Hock Tan said it benefited from a 74 per cent jump in revenue for AI chipsIn the bond market Treasury yields climbed as rising oil prices put more upward pressure on inflation which could keep the Federal Reserve from cutting interest ratesThe yield on the 10year Treasury rose to 414 per cent from 409 per cent late Wednesday and from just 397 per cent before the war with Iran startedThe Fed could keep interest rates high to keep a lid on inflation But high interest rates would also keep it more expensive for US households and companies to borrow money grinding down on the economyThe central bank had indicated it planned to resume its cuts to interest rates later this year in hopes of giving a boost to the job market and economy Because of the war and higher oil prices traders have pushed their forecasts further into the summer for when the Fed could begin cutting rates againSeveral reports on the US economy also came in mixedOne said fewer US workers filed for unemployment benefits last week than economists expected Thats an encouraging signal for the job marketIn stock markets abroad indexes rebounded in Asia following historic losses a day before South Koreas Kospi jumped 96 per cent to recover much of its 121 per cent plunge from Wednesday which was its worst drop everBut indexes fell in Europe as oil prices began to accelerate Frances CAC 40 fell 15 per cent and Germanys DAX lost 16 per cent