Stocks slide after Trump vows to continue Iran strikes

Stocks fell on Thursday as oil prices surged more than 8% following President Trump’s vow to continue strikes on Iran and his lack of a new plan to reopen the Strait of Hormuz. The S&P 500 dropped 0.4%, the Dow Jones Industrial Average fell 0.1%, and the Nasdaq slid 1% after the opening bell. This decline came after a 3.5% rally over the previous two trading days as investors hoped for a resolution to stabilize global energy markets. Markets will be closed on Friday for the Good Friday holiday.

Oil prices jumped after Trump’s remarks, with Brent crude rising 8.1% to $109.35 per barrel and benchmark U.S. crude climbing 12.9% to $113.03. Despite the stock market decline, it is not hitting new lows, indicating that markets are digesting the news about the war calmly. Corporate earnings also seem to be holding up despite the challenges posed by higher energy prices.

During his address, Trump reiterated that U.S. objectives are close to being met and Iran’s offensive capabilities have been significantly weakened after over a month of conflict. However, he did not provide any new information on these objectives or a plan to reopen the Strait of Hormuz, only committing to continuing U.S. strikes on Iran for the next two to three weeks.

The Strait of Hormuz, a vital passage for around 20% of the world’s oil and liquefied natural gas supply, remains closed and could stay shut to oil tanker traffic through April. The longer it remains closed, the greater the economic impact, according to Oxford Economics’ Ryan Sweet. The Trump administration releasing oil from the Strategic Petroleum Reserves to offset supply reductions will become less effective the longer the strait remains shut, leading to higher oil prices.

Gasoline prices in the U.S., linked to global oil prices, are likely to keep rising above $4 if the strait remains closed, said Bernard Yaros of Oxford Economics. The average price of a gallon of gasoline in the U.S. reached $4.08 on Thursday, with American drivers spending an additional $8.4 billion in gas costs since the start of the Iran war on Feb. 28.

Investors are experiencing FOMO (fear of missing out) as they anticipate the war wrapping up by the end of April and energy prices decreasing by year-end, according to Capital Economics. Although there is concern that the conflict could last longer than expected, investors are preparing for a potential market rally.

Overall, the uncertainty surrounding the war in Iran and the closure of the Strait of Hormuz continue to impact global markets, with investors closely monitoring developments and preparing for potential market volatility in the coming weeks.