Fears of soaring oil prices are battering markets again on Thursday after a brief respite in Wednesday’s session.
The sell-off in US stocks resumed as Iran said it attacked a crude tanker, reigniting fears about an oil-price shock that could send inflation higher.
Oil prices continued to climb after plateauing earlier in the week. April futures contracts for West Texas Intermediate crude rose as much as 6% to $79 a barrel on Thursday, the highest level in about eight months.
Brent crude, the international benchmark, traded around $83 a barrel, up 4% and sticking close to its peak of around $84 a barrel earlier this week.
Major stock indexes tumbled into the red, with the Dow shedding 800 points around midday. The S&P 500 and Nasdaq Composite were also down, despite some optimism about the AI trade after Broadcom reported robust first-quarter revenue growth.
Here’s where US indexes stood around noon ET on Thursday:
Elsewhere, shares of Berkshire Hathaway were up after the company said it was buying back its own stock again. CEO Greg Abel, who took the helm from Buffett at the start of the year, also purchased $15 million in Berkshire shares.
Here are the market’s other notable moves:
Investors have been growing antsy about the knock-on effects of the US-Iran war, with no end in sight to the conflict yet. The worst fear is for oil prices to spiral and cause inflation to become unanchored, as it did in the 1970s. Worries about stagflationary episode have cropped up this week as economists factor the Iran war into existing conerns about elevated inflation and tepid fourth-quarter GDP growth.
The shock to energy prices will likely be “relatively short-lived,” Michael Saunders, a senior economic advisor at Oxford Economics, wrote in a note on Thursday, though he warned of a more severe inflationary impact if the Middle East conflict is drawn out for longer.
“It’s simple at this point: the more crude oil rises, the bigger a headwind it will be for equities,” Paul Hickey, the co-founder of Bespoke Investment Group, wrote in a client note on Thursday.
Hotter inflation could derail the market’s outlook for Fed rate cuts, a key catalyst investors had been betting would keep the bull market going.
Those fears are evident in the recent climb in US Treasury yields, which reflect the market’s outlook for interest rates. The 10-year US Treasury yield jumped another four basis points, a sign investors are expecting higher interest rates down the line.
“Iran conflict has the potential to complicate the inflation situation in the coming months and could throw some sand in the easing gears,” economists at BMO wrote on Thursday, though they noted the situation could change.
“Higher oil prices may suit Iran for now, given US fuel‑price sensitivity ahead of driving season in a mid‑term year. Both sides still have incentives to de‑escalate, as high prices are politically costly for the US and economically damaging for Iran,” strategists at SocGen wrote in a client note on Tuesday.
