As the conflict in the Middle East entered its sixth day, US stock markets closed in the red on Thursday, spooked by a sharp spike in oil prices and renewed anxiety over stubborn inflation. With missile and drone threats already causing tanker traffic to plummet, US crude surged by 8.5 per cent to hit $81 per barrel — its highest mark since July 2024 — while Brent crude climbed nearly 5pc to settle at $85.41. Investors are increasingly concerned that a protracted energy disruption will not only fuel price rises but also potentially scupper the Federal Reserve’s plans for interest rate cuts this year.
The nerves of the markets were clear through the major indices, where the Dow Jones Industrial Average lost over 780 points, or a decline of 1.61 pc, while the S&P 500 and the Nasdaq Composite lost 0.56 pc and 0.26 pc, respectively. The sector results were mixed, with industrials, materials, and healthcare losing over 2 pc, and airlines losing heavily, with Southwest losing nearly 7 pc due to the threat of fuel costs eroding their margins. On the other hand, energy majors such as Chevron gained 3.9 pc due to the boost in their revenues from the rise in oil prices.
Technology stocks also provided a vital buffer against deeper losses. Broadcom led the charge in the sector, jumping 4.8 pc after announcing bullish projections for its artificial intelligence chip revenue, which it expects to top $100 billion next year. Interestingly, despite the geopolitical turmoil, Wall Street has managed to outpace its peers in Europe and Asia this week, largely thanks to a tech rebound following a difficult February. However, market analysts warn that if crude prices creep toward the $100 mark, the current resilience of the Nasdaq—which is up slightly since the conflict began—could quickly evaporate.
On the domestic front, the US economy continues to send mixed signals that complicate the Federal Reserve’s path. Fresh data showed that unemployment claims remained unchanged, suggesting a labour market that is still remarkably tight. This, combined with stronger-than-expected manufacturing and services figures, has led some economists to believe the economy is running too hot for the Fed to comfortably lower rates. Market expectations for rate cuts have already been dialled back from 50 basis points to roughly 40 since the outbreak of hostilities. With a major payrolls report due tomorrow, the mood on the trading floor remains one of cautious apprehension as the world watches for any sign that the conflict might be nearing a diplomatic resolution.
Also read: US grants India 30-day waiver for Russian oil stuck at sea
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