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Dow drops 900 after oil prices jump to 2-year high as Iran-US war enter Day-7
Dow drops 900 after oil prices jump to 2-year high as Iran-US war enter Day-7
US stocks fell sharply Friday, with the Dow Jones Industrial Average down 909 points or 1.9%, as of 9.35 am Eastern Time, and the Nasdaq composite being 1.6% lower.
This comes even as the financial markets anticipate the “worst-case scenario”, with a combination of weakening economy and high inflation raising concerns’, the Associated Press reported.
The S&P 500 dropped 1.6% in the aftermath of a report showing US employers had cut more jobs last month than they created. This also comes amid oil prices reaching their highest level in nearly two years owing to the war in Iran, which has widened to the entire West Asian region.
Brian Jacobsen, chief economic strategist at Annex Wealth Management, said a “negative payrolls number combined with a big jump in oil prices” had led to trader worries about ‘stagflation.’ “You can’t sugarcoat this report,” Jacobsen told AP.
Surge in oil prices amid conflict
The price for a barrel of Brent crude, the international standard, jumped another 5.7% to $90.25. A barrel of benchmark US crude climbed 8.9% to $88.20.
This surge, with Brent up from near $70 late last week, is the consequence of the war expanding to other Middle East nations, and the targeting of areas critical to the production and movement of energy in the Middle East, AP reported.
Iran's strategic blocking of the Strait of Hormuz chokepoint, which is the transit passage for roughly one-fifth of the world’s oil, has made matters worse. Energy prices could climb higher if the exports of Iranian gas to much of Asia remain halted, owing to a likely bidding war between Europe and Asia, AP cited Fatih Birol, chief of the International Energy Agency, as saying.
While the US stock market has in the past bounced back relatively quickly in the aftermath of conflicts, it can only do so as long as oil prices do not jump too high for too long. US President Donald Trump's remarks today suggesting that only “unconditional surrender” from Iran could put an end to the conflict douses hopes of an earlier resolution to the conflict, thus contributing to the uncertainty regarding energy prices.
