U.S. Stocks Decline as Oil Prices Surpass $100
On Thursday, U.S. stocks fell sharply as oil prices surged past $100. This spike followed Iran’s new supreme leader’s warning about keeping the Strait of Hormuz closed.
By 11 a.m. ET, the Dow Jones Industrial Average was down 590 points, which is about 1.25%. Meanwhile, both the S&P 500 and Nasdaq saw declines of 1.25% and 1.7%, respectively.
Brent crude oil prices rose to $100 a barrel overnight, while West Texas Intermediate crude approached $93. The national average for gasoline also rose to $3.60, marking an increase of over 20% in just the past month, according to AAA.
Iran has threatened to target ships attempting to cross this vital sea route, which accounts for roughly 20% of the world’s oil supply. The new supreme leader stated the intention to sustain this blockade.
“Of course, we must continue to use the option of closing the Strait of Hormuz,” Mojtaba Khamenei expressed in his first address to the nation, shortly after reports about severe injuries to his family members from a U.S.-Israeli attack surfaced.
Economic experts caution that shocks in energy prices could impact consumer costs, potentially reigniting inflation. This situation arises at a time when the labor market shows signs of softening, leading to what is referred to as stagflation—marked by high costs and stagnant growth.
Donald Trump mentioned that executing Operation Epic Fury in Iran could be more crucial than the implications of rising oil and diesel prices, which he noted may elevate costs across gas stations, grocery outlets, and restaurants.
“The U.S. is the world’s largest oil producer, so there’s considerable profit to be made when oil prices rise,” Trump stated in a post early Thursday on Truth Social.
However, he emphasized, “My primary concern as president is stopping Iran from acquiring nuclear weapons and causing destruction in the Middle East and around the world. I won’t allow that!”
Energy Secretary Chris Wright commented that the U.S. is not yet prepared to safely escort tankers through the Strait of Hormuz. He slightly retracted earlier statements from this week about the Navy already fulfilling that role.
“This will happen soon, but not at this moment,” Wright informed CNBC. “We are completely unready, as our military focus is currently on dismantling Iran’s offensive capabilities.”
He added that the Navy is likely to be able to escort tankers through the perilous Strait by the end of the month.
Earlier in the week, Wright deleted a post claiming that the U.S. had successfully cleared an oil tanker through the strait.
White House press secretary Caroline Levitt later admitted that this post contained inaccuracies.
Analysts predict that oil prices might stay high even if the conflict resolves quickly, citing that Iraq and Kuwait have started reducing production at various fields and that Iran is reportedly placing mines in the Strait of Hormuz.
