U.S. Stocks experienced a broad selloff Thursday, with the S&P 500 recording its largest three-day percentage drop in a month, as Iranian strikes on two oil tankers propelled crude prices toward $100 per barrel and intensified inflation concerns. The Dow Jones Industrial Average fell by more than 1%, joining declines across all three major U.S. Stock indexes, with energy stocks being the only sector to avoid significant losses.
The surge in oil prices followed Iranian actions in the Middle East, specifically strikes on oil tankers, raising fears of significant disruption to global oil supplies. Brent crude, the international standard, briefly touched $119.50 per barrel on Monday, a level not seen since the summer of 2022 following the Russian invasion of Ukraine, before settling at $91.98 on Wednesday. U.S. Benchmark crude gained more than 4% to $87.25 on the same day. Front month WTI crude futures settled up 9.7% on Thursday, while Brent settled up 9.2%, reaching $100 per barrel.
Concerns are particularly focused on the Strait of Hormuz, a strategically vital waterway through which approximately 20% of the world’s oil supply passes daily. The ongoing conflict has largely halted traffic through the strait, leading to a buildup of crude oil in regional storage facilities as producers face limited export options. Some oil producers have begun announcing output cuts in response.
The International Energy Agency (IEA) responded to the escalating crisis by announcing the release of a record 400 million barrels of oil from emergency stockpiles, aiming to alleviate immediate price pressures. However, officials acknowledge that a sustained easing of market tensions will require a full resumption of oil and natural gas flows from the Persian Gulf region.
The U.S. Federal Reserve is scheduled to convene on March 17, and while recent inflation data has indicated some moderation in price growth, the impact of the war in Iran and the subsequent oil price spike has yet to be fully reflected in economic indicators. The central bank’s updated economic projections will be closely scrutinized for revised inflation estimates.
Ayatollah Mojtaba Khamenei, Iran’s Supreme Leader, has vowed to maintain the closure of the Strait of Hormuz, further exacerbating anxieties about global oil supplies. The U.S. Administration has reportedly begun discussions with oil companies and shippers regarding potential waivers to the Jones Act, a century-old law governing domestic shipping, in an effort to mitigate rising fuel prices.
Market analysts note a “sell first, ask questions later” mentality prevailing among investors, with limited safe-haven sectors outside of energy. The Dow slipped nearly 300 points, or 0.6%, on Wednesday, after tumbling nearly 500 points the previous day. The Nasdaq composite was down 0.2% on Wednesday, and rose 0.1% on Thursday.
