U.S. stocks dropped significantly on Thursday morning, driven by a spike in oil prices following President Trump’s promise to take “extremely severe” actions against Iran. Investors remain uncertain about the timeline for restoring the free flow of oil through the Strait of Hormuz.
By about 10:25 a.m. ET, the Dow Jones Industrial Average had fallen 412 points, down 0.9%. The S&P 500 and Nasdaq followed, declining by 0.8% and 1%, respectively.
Oil prices surged, with Brent crude climbing 7.1% to reach $108.37, while West Texas Intermediate saw an 11.2% increase to $111.36.
In a speech given the night before, President Trump confirmed that the U.S. would exit Iran within two to three weeks, alongside his commitment to conduct rigorous military actions against the country, suggesting a bombing campaign that would take Iran “back to the stone age.”
While he aimed to frame the conflict as a necessary investment for future generations, there’s a palpable fear among investors that rising tensions could further damage crucial energy infrastructure and sustain high oil prices even after hostilities cease.
Following an Israeli strike on Iran’s South Pars gas field, Iran responded by targeting significant energy facilities in both Qatar and Saudi Arabia.
Some analysts have expressed concern that damage to Qatar’s Ras Laffan natural gas plant might have created an “Armageddon” scenario, indicating that repairs and stabilization of supply chains will require considerable time and resources.
Furthermore, investors are uneasy about Trump’s claim that it’s primarily up to other nations to reopen the Strait of Hormuz, a critical maritime route that accounts for 20% of global oil transport and has become pivotal in the ongoing conflict.
“We’ll collaborate, but they should take the lead,” Trump remarked, suggesting that those countries reliant on oil from the strait should take more direct action.
The Wall Street Journal has noted that President Trump may be willing to leave Iran without a peace agreement to facilitate the reopening of the strait.
Despite the turmoil, stock indexes did experience a recovery after the S&P 500 recorded its most substantial two-day gain since last May, as investors remained hopeful for an expedited resolution to the conflict.
