Equities give back rebound as conflict drives risk-off trading
U.S. stocks sold off sharply on Thursday as the war with Iran intensified and energy prices pushed higher, undoing gains from the previous session and extending a stretch of market instability linked to the conflict. The Dow Jones Industrial Average dropped 1,003 points, or 2%, while the S and P 500 fell 1.2%. The Nasdaq declined 1.1%.
The move reversed the prior day’s recovery and reflected renewed concern that the conflict could persist, raising the odds of higher inflation and weaker growth. Investors have been taking cues from the oil market since the U.S.-Israeli attack on Iran over the weekend, with shifts in crude prices feeding directly into expectations for consumer costs, corporate margins, and central bank policy.
Oil climbs on fears of Hormuz disruption and supply squeeze
Crude prices advanced as traders assessed the risk of a prolonged disruption in the Strait of Hormuz, a key shipping route that handles about one-fifth of global oil supply. U.S. crude topped $79 per barrel on Thursday, reaching its highest level since June. The market focus has been whether unrest and attacks in the area will further restrict tanker movements and insurance coverage for shipping.
Higher crude costs are already feeding into retail fuel prices. U.S. gasoline rose to $3.25 per gallon, up nearly 9% from a week earlier, according to AAA data.
Trump orders maritime insurance and signals possible naval escorts
Markets steadied somewhat after President Donald Trump posted on social media that he had ordered the federal government to provide political risk insurance and guarantees for the financial security of maritime trade. He added that if needed, the United States Navy would begin escorting tankers through the Strait of Hormuz as soon as possible.
Even with the policy signal, shipping conditions in the strait remained unsettled in recent days, keeping traders focused on the risk of sustained supply disruption. With diesel-fueled transport central to global trade, prolonged disruption could raise costs not only for oil but for a broader set of goods reliant on shipping and trucking.
Treasury yields rise as inflation and stability worries surface
U.S. Treasury yields increased on Thursday, a move that can reflect shifting expectations for inflation and financial stability. Because bonds pay fixed cash flows, higher inflation reduces the real value of those payments, making bonds less attractive unless yields adjust upward.
In periods of economic uncertainty, bond markets can also reprice on concerns about growth, government borrowing needs, and the likelihood that the Federal Reserve keeps policy restrictive to contain inflation. Thursday’s rise in yields added another layer to the market narrative, suggesting investors are weighing the inflationary implications of higher oil prices alongside the broader economic risks tied to an expanding conflict.
