Stocks are volatile, oil soars as Trump rattles markets with lack of clear exit plan
By John Towfighi, Lucy Bayly, CNN
New York (CNN) — Stocks were volatile and oil prices soared Thursday as investors monitored developments in the Middle East and digested President Donald Trump’s pledge to intensify the war with Iran.
The Dow fell 61 points, or 0.13%, paring losses after dropping by more than 650 points earlier. The S&P 500 and Nasdaq rose 0.11% and 0.18%, respectively, erasing losses after each dropping by more than 1.5% earlier.
Stocks had opened lower Thursday but regained ground after reports from Iran’s semi-official news agencies that Iran and Oman are drafting a protocol to facilitate traffic through the Strait of Hormuz. Traders are fixated on when oil might resume flowing through the strait.
Oil prices climbed and market volatility remained elevated after Trump, in an April 1 evening address to the nation, revealed no clear exit strategy and no solution to the effective closure of the strait, which has choked off one-fifth of the global supply of oil.
Investors are concerned that the war will continue to push up global energy costs, leading to higher inflation and slower economic growth.
“The fog of war remains thick and crude flows are still too low to sound the all-clear,” Felix Vezina-Poirier, chief strategist at BCA Research, said in a note.
Trump said the war would drag on for at least two to three more weeks and even signaled an escalation in the conflict, with the United States potentially targeting Iran’s oil facilities.
Trump’s comments led to another spike in oil prices: Brent crude, the global oil benchmark, rose 7.8% Thursday, to $109.03 a barrel. WTI, the US benchmark, soared 11.41%, to $111.54 per barrel.
The futures contracts trading Thursday for WTI were for May delivery, while the Brent contracts were for June delivery. Traders bid up the price of the nearer contract due to expectations the strait will be disrupted in the near-term, leading to WTI trading above Brent.
Stocks in Asia and Europe were lower. Japan’s Nikkei 225 sank 2.38% and South Korea’s Kospi fell 4.47%. Germany’s DAX index fell 0.78%, paring losses after dropping 2.66% earlier.
US gas prices are now up 37% since the start of the war, with the average per-gallon price reaching $4.08 in the latest reading from AAA. Americans are feeling the pain of higher prices, with some families facing stark choices due to the increase in cost of everything from groceries to air travel.
Higher oil prices and uncertainty about the length of the war are rippling through the economy via higher energy costs. And it’s jolting the stock market, too: The Dow and S&P 500 just posted their worst quarterly performances since September 2022. The Nasdaq last month had its worst month in a year.
Stocks had rallied earlier this week, posting their best day since May on Tuesday as optimism rose that the United States might make an effort to end the war with Iran. But Trump’s remarks Wednesday offered traders little reassurance.
“Markets will only recover in a true and sustainable way once global energy markets begin to normalize,” Kyle Rodda, senior financial market analyst at Capital.com, said in a note.
In the bond market, yields fell Thursday after initially rising. Yields are still higher compared to the start of the war, translating into higher borrowing costs in the economy. Investors have sold bonds, pushing yields up, to account for potential inflation and the prospect of the Federal Reserve holding interests steady for longer.
Thursday marked the last US trading day of the week, with markets closed Friday in observance of the Good Friday holiday.
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