Stocks Decline as Oil Prices Surge After Trump’s Comments on Iran
On Wednesday, stock prices dipped while oil prices spiked by up to 6% after President Trump declared that the ceasefire with Iran was “over.” He also mentioned that the U.S. was preparing for a new military action following Iran’s attacks on ships in the Strait of Hormuz.
By around 9:40 a.m. ET, the Dow Jones Industrial Average had fallen by 0.9%, translating to a drop of 453 points. The S&P 500 and Nasdaq were also down by 0.4% and 0.2%, respectively.
Brent crude oil futures saw an increase of 5.4%, reaching $78.18 a barrel, after peaking at nearly $79 earlier in the day. West Texas Intermediate crude oil rose by 4.8%, settling at $73.81 a barrel.
The national average gas price was around $3.80 per gallon on Wednesday, which, while significantly lower than the wartime high of $4.56, has remained steady in recent days amidst escalating tensions between the U.S. and Iran.
Typically, there’s a lag of one to two weeks between shifts in the oil market and corresponding changes in oil prices. Given the renewed tensions in the Strait—a crucial maritime route for 20% of the world’s oil—it’s possible that gas prices could stay below $3.
During a NATO summit in Ankara, Turkey, when asked about the status of the interim peace agreement with Iran, Trump responded, “I think it’s over for me. I don’t want to have anything to do with them anymore. They’re scum.”
He continued, saying, “We hit them very hard last night. We’ll probably give them a tough shot tonight as well.”
Last month, Trump signed a memorandum that gave the U.S. and Iran 60 days to finalize an agreement regarding Iran’s nuclear program, sanctions relief, and the unfreezing of billions in Iranian assets.
On Tuesday, the U.S. military conducted a “robust” night attack on Iran in retaliation for attacks on three commercial vessels near the Iranian Strait, actions deemed a breach of the memorandum.
Robert Edwards, chief investment officer at Edwards Asset Management, noted that Wednesday’s market movements indicated ongoing geopolitical concerns, yet he cautioned against panic.
He stated, “This is the most significant escalation in Iranian tensions since the ceasefire was established nearly a month ago. It’s triggered the typical market response: rising oil prices, increased bond yields, and falling stock prices.”
Despite the dip in stock prices, Edwards believed if they continued to decline, it could present a buying opportunity. He maintained his forecast of the S&P 500 reaching 7,700 by year-end, supported by solid earnings amidst uncertainty.
Energy stocks surged as investors anticipated greater profits for major companies. Shares of ConocoPhillips, Marathon Petroleum, Chevron, and Exxon Mobil increased by 1.7%, 3.7%, 1.4%, and 0.3%, respectively.
In contrast, tech stocks, especially those involved in chip manufacturing, continued to decline as concerns lingered about a potential “AI bubble” due to massive investments in emerging technologies.
Shares of Samsung, Intel, AMD, and Micron dropped by 6.3%, 2.3%, 0.5%, and 0.2%, respectively.
Investors were also awaiting the release of the Federal Reserve’s June meeting minutes at 2 p.m. ET for more insights into Kevin Warsh’s first meeting as chairman, particularly his unexpectedly hawkish stance on inflation.
CME FedWatch indicated that most traders still expect the Fed to maintain current rates during the upcoming meeting, although the long-term outlook seems to be shifting from lower to higher rates.
