Stocks were under pressure on Thursday as oil prices added to their surge on supply disruption worries while the Iran war continued.
The Dow Jones Industrial Average fell 547 points, or 1.2%. The S&P 500 lost 0.8%, while the Nasdaq Composite declined 0.9%.
Crude prices continued to climb after Energy Secretary Chris Wright told CNBC Thursday that the U.S. Navy is “not ready” to escort oil tankers through the Strait of Hormuz, though he said it will likely be able to do so by the end of the month. West Texas Intermediate futures traded 6% higher at around $93 per barrel. Brent crude futures advanced 6% to roughly $98 per barrel and briefly touched $100 again.
Traffic in the passageway has practically reached a standstill as the conflict in the Middle East escalates. Overnight, three additional foreign vessels were hit in the Persian Gulf, according to authorities. That comes after three separate ships, including one in the Strait, had been struck Wednesday.
U.S. forces on Tuesday had sunk 16 mine-laying Iranian ships near the Strait. Insurance company Chubb was announced as the lead underwriter for a U.S. government-led program to provide insurance to ships attempting to traverse the strait.
“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. “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 costs, Wright said late Wednesday that the U.S. will release 172 million barrels of oil from the Strategic Petroleum Reserve. It will take about 120 days to deliver the fuel.
The International Energy Agency also on Wednesday agreed to a coordinated release of 400 million barrels of oil in an effort to combat the supply disruption caused by the war. Oil prices remained higher in the previous session, however, amid worries that the conflict could be drawn out.
President Donald Trump earlier this week said that the war will end “very soon,” which had caused a reprieve in surging oil prices after they topped $100 a barrel.
The S&P 500 and the 30-stock Dow declined on Wednesday as investors remained wary of the impact of the U.S.-Iran war on oil prices throughout the day, as higher costs stoke fears of inflation. Despite the ongoing conflict, the S&P 500′s pullback has been relatively tame with the benchmark just 3.2% off its record reached in January.
Selling was broad on Thursday, with banks and tech stocks in the red. Morgan Stanley led financials lower after capping private credit fund withdrawals. Energy stocks, including Chevron and Exxon Mobil, were among the few stocks in the green.
