Oil prices soared above $100 a barrel for the first time since Russia’s invasion of Ukraine in 2022, as Iran carried out retaliatory strikes against oil-producing Gulf states.
The Dow Jones Industrial Average fell 849.76 points (−1.79%) to 46,651.79, while the S&P 500 fell 92.18 points (−1.37%) to 6,647.82 and the Nasdaq Composite fell 264.97 points (−1.18%) to 22,122.71.US President Donald Trump said this weekend that the price spike was a “small price to pay” to eliminate Iran’s nuclear threat as the war showed no signs of easing.
Iran marked the appointment of Ayatollah Mojtaba Khamenei to replace his father as supreme leader early this week with a new barrage of missiles against Israel and the Gulf states.
After spiking around 30 percent in Asian trading, international benchmark Brent and key U.S. oil contract WTI both pared gains to around 10 percent to around $100 a barrel as trading picked up in New York. Even after the Russian invasion of Ukraine in 2022, which saw oil prices reach $130.50 per barrel, the price increase was not so staggering.
“Stocks are a sea of red today,” said Kathleen Brooks, research director at trading group XTB.
Stocks in Europe recovered some of their earlier losses as oil prices gave up much of their gains as the Group of Seven industrialized nations prepared to tap emergency reserves to ease supply pressures.Wall Street stocks fell less than one percent as trading got underway, smaller than the losses seen in futures trading.
“The market has calmed somewhat at the prospect of a coordinated release of strategic oil reserves by G7 allies, but there are still upside risks to oil prices, and anything the G7 does today could only have a temporary impact,” she added.
The discussions come as maritime traffic in the Strait of Hormuz – through which a fifth of the world’s crude oil passes – has come to a virtual standstill since the war began on February 28.
Analyst Lee Hardman of financial group Mitsubishi UFJ said the size of the release of oil from strategic reserves could cover two to three weeks of normal supplies through the Strait of Hormuz.
“It would be a temporary solution to help prevent an even more disruptive oil price rise in the coming weeks,” he added.
Markets are concerned that a spike in energy prices would trigger inflation and slow growth.
“The rise in oil prices significantly increases the risk of stagflation for the global economy and could lead to a deeper sell-off in global stock markets,” Hardman said.
Stagflation refers to a period of high inflation and economic stagnation. Central banks have been forced to raise interest rates to tackle inflation, hampering growth.
The prospect that interest rates would remain high, or even be raised to combat inflation, pushed government bond yields higher on Monday.
In Asia, Seoul, one of the best-performing regions this year thanks to a technology rally, closed six percent lower, while Tokyo lost more than five percent and Taipei fell more than four percent.
#stocks #today #Dow #Jones #plunges #points #Nasdaq #fall #rising #crude #prices #fuel #inflation #concerns