Global stock markets showed a mixed performance Wednesday as oil prices resumed their upward trajectory amid continued disruption to shipping in the Middle East. The S&P 500 edged down 0.1 percent, following a period of volatility triggered by the escalating conflict between the U.S. And Israel with Iran. The Dow Jones Industrial Average fell 316 points, or 0.7 percent, while the Nasdaq Composite managed a slight gain of 0.1 percent, as of 1:02 p.m. ET.
The primary driver of market fluctuations remains the price of oil, which briefly surged to levels not seen since 2022 earlier this week due to concerns over potential long-term disruptions to Middle Eastern oil production. This raised fears of a renewed surge in global inflation. The International Energy Agency (IEA) announced Wednesday it will release 400 million barrels of oil from emergency stockpiles, the largest such release in its history, in an attempt to stabilize prices.
While the IEA’s action is expected to provide some short-term relief, analysts caution We see unlikely to fully offset the impact of ongoing supply disruptions. “I think it will have a calming effect and it will push prices down simply because, you know, sentiment will be eased, and essentially we will have more oil available on the market,” said Naveen Das, an energy analyst at Kpler in London. “However, it won’t be an effective Band-Aid, really, to replace the volumes that we’ve lost so far.” Das explained that the daily volume of oil potentially lost through the Strait of Hormuz could outpace the rate of release from the IEA reserves.
Brent crude, the international benchmark, rose three percent to $90.42 a barrel. U.S. Benchmark crude gained 1.5 percent, reaching $84.73. Germany, Japan, and Austria announced they would also contribute to the IEA’s emergency release, with Germany’s minister for economic affairs and energy, Katherina Reiche, stating that deliveries of the first quantities would begin within a couple of days.
Concerns are focused on the Strait of Hormuz, a strategically vital waterway through which approximately 20 percent of the world’s oil supply passes daily. The U.S. Military reported destroying more than a dozen Iranian vessels used for laying mines on Tuesday, as Iran vowed to block oil exports to its adversaries, stating it would not allow “even a single litre” to be shipped to them.
Analysts emphasize that a sustained increase in oil prices could have severe consequences for the global economy. Fawad Razaqzada, an analyst with Forex.com, wrote in a market report that the IEA release will only “buy time,” adding, “The real issue is the disruption to supply flows, and the longer that continues unresolved, the higher oil prices are likely to go if the Iran war continues.”
The potential for “stagflation” – a combination of stagnant economic growth and high inflation – is a growing concern. A report released Wednesday indicated that U.S. Consumer prices rose 2.4 percent in February compared to the previous year, matching expectations but remaining above the U.S. Federal Reserve’s two percent target. This figure does not yet reflect the recent surge in gasoline prices linked to the conflict.
The oil price spike has also led traders to reassess expectations for when the Federal Reserve might begin cutting interest rates, a move sought by President Trump to stimulate the economy. However, such cuts could potentially exacerbate inflationary pressures.
Historically, stock markets have demonstrated a tendency to recover relatively quickly from military conflicts, provided oil prices do not remain elevated for an extended period. The current uncertainty surrounding the duration and intensity of the conflict, and its impact on oil supplies, continues to fuel market volatility.
