Global stock markets slid Thursday as escalating conflict involving Iran pushed oil prices sharply higher, raising concerns about inflation and economic stability worldwide.
On Wall Street, the S&P 500 fell 1.1%, while the Dow Jones Industrial Average dropped 588 points, or 1.2%, by mid-morning trading. The Nasdaq Composite declined 1.4%, as investors reacted to renewed volatility in energy markets.
The main focus for investors was the oil market. Brent crude, the global benchmark, surged overnight to $101.59 per barrel before easing slightly to about $99.50, marking an 8% increase. The rise comes amid fears that the ongoing conflict could disrupt oil production and shipping routes across the Persian Gulf.
Iran has escalated attacks targeting oil fields and refineries in an effort to increase economic pressure on the United States and Israel. The conflict has effectively halted cargo traffic through the Strait of Hormuz, a critical shipping channel through which roughly 20% of the world’s oil supply normally passes.
With tankers unable to move through the narrow waterway, some oil producers have begun reducing output because they cannot transport their crude to global markets.
In response, countries are attempting to stabilize supply. The International Energy Agency (IEA) announced Wednesday that member nations would release 400 million barrels of oil from emergency reserves, a record intervention intended to ease market disruptions.
However, analysts warn that the move offers only short-term relief. If the Strait of Hormuz remains blocked for an extended period, oil prices could surge to $150 per barrel, potentially triggering a new wave of global inflation.
Despite recent volatility, U.S. equities remain relatively resilient. Even after sharp swings in recent weeks, the S&P 500 is still about 4% below its all-time high reached in January.
The surge in oil prices comes at a delicate time for the economy. A recent report showed weaker-than-expected hiring in the United States, raising fears of stagflation — a scenario where economic growth stalls while inflation remains high.
A more positive economic signal emerged Thursday, however, when new data showed a slight decline in U.S. unemployment benefit claims, suggesting layoffs remain relatively low.
Corporate earnings also influenced markets. Dollar General reported stronger-than-expected quarterly profit and revenue but warned that growth may slow in the coming year as higher fuel costs pressure consumer spending. Its stock dropped 7.8% following the outlook.
Companies with large fuel expenses were among the hardest hit. United Airlines plunged 33.7%, while cruise operator Carnival fell about 6% as investors anticipated rising operating costs tied to higher oil prices.
Markets outside the United States also declined. Japan’s Nikkei 225 fell 1%, while France’s CAC 40 slipped 0.7%, reflecting broader global concerns over the conflict’s economic impact.
Meanwhile, U.S. Treasury yields continued rising alongside oil prices. The yield on the 10-year Treasury note climbed to 4.22%, up from 3.97% before the conflict began, increasing borrowing costs for consumers and businesses.
The spike in energy prices has also shifted expectations for U.S. monetary policy. Traders are pushing back forecasts for when the Federal Reserve might resume interest rate cuts, even as President Donald Trump continues to urge the central bank to lower rates to support economic growth.
Meanwhile, U.S. benchmark crude oil rose 8.4% to $94.57 per barrel, underscoring the growing pressure energy markets are placing on the global economy.
