US Stocks Fall Sharply as Oil Prices Surge Amid Escalating Middle East Tensions

US stocks fell sharply on Thursday as rising oil prices and escalating tensions in the Middle East rattled investors. The surge in crude prices was due to supply disruption fears linked to the Iran war, pushed major indices lower. At around 11:30 am EST, the Dow Jones Industrial Average dropped more than 600 points, while the S&P 500 and the Nasdaq Composite both fell about 1%. Oil prices jumped after Iran’s new Supreme Leader Mojtaba Khamenei said today that the Strait of Hormuz should remain closed as a “tool to pressure the enemy.” West Texas Intermediate crude futures rose about 7% to around $94 per barrel. Brent crude futures also climbed 7% to roughly $99 per barrel after briefly touching the $100 mark again. The sharp rise in oil prices raised concerns that higher energy costs could push inflation higher and hurt global economic growth, weighing on equities. Traffic through the Strait of Hormuz has nearly come to a standstill as the conflict in the Middle East intensifies. Energy Secretary Chris Wright told CNBC that the US Navy is “not ready” to escort oil tankers through the strategic waterway yet, though he said it may be able to do so by the end of the month. Overnight, authorities reported that three additional foreign vessels were struck in the Persian Gulf. The incidents followed attacks on three other ships on Wednesday, including one in the Strait itself. Earlier in the week, US forces sank 16 Iranian ships that were allegedly laying mines near the Strait. Traders are closely watching how the conflict could impact global markets and financial exposure to energy shocks. “The question is how many people have this on their books. Where is it being marked? Are they derivatives? We need to keep a very close eye on that as things unravel quickly,” said Joe Saluzzi, co-head of equity trading at Themis Trading to Reuters. Adam Crisafulli of Vital Knowledge said Iran’s strategy appears aimed at using oil markets to increase pressure on its rivals. “Iran’s strategy of sowing economic chaos in the Gulf is working as tankers come under attack and Hormuz stays shuttered, pushing Brent up toward $100,” said Adam Crisafulli of Vital Knowledge to CNBC. “The U.S. and Israel have military dominance and Iran’s missile/nuclear programs may be degraded, but Tehran’s hardline [government] is firmly entrenched, and it’s plan now seems to be leveraging oil to push Trump further down an offramp.” To help ease energy prices, Wright said late Wednesday that the United States will release 172 million barrels of oil from the Strategic Petroleum Reserve. The supply will be delivered over about 120 days. The International Energy Agency also agreed to a coordinated global release of 400 million barrels of oil to counter supply disruptions caused by the conflict. Regardless of these measures, oil prices stayed elevated, as investors worry the war could last longer than expected. Selling pressure spread across most sectors on Thursday, with banks and technology stocks leading the declines. Morgan Stanley weighed on financial stocks after limiting withdrawals from a private credit fund. Energy companies were among the few gainers as oil prices rose. Shares of Chevron and Exxon Mobil traded higher. Stocks had already slipped on Wednesday as investors remained cautious about the impact of the US-Iran war on inflation and economic growth. Even with the recent declines, the S&P 500 is still only about 3.2% below its record high reached in January. Earlier this week, President Donald Trump said the war would end “very soon,” which briefly eased oil prices after they had surged above $100 per barrel.