Stocks in the U.S. extended their declines on Friday, marking the end of a fifth consecutive week of losses, the longest streak in almost four years. The S&P 500 dropped 1.7%, experiencing its worst week since the onset of the conflict with Iran. The Dow Jones Industrial Average shed 793 points, or 1.7%, slipping over 10% from its recent high, while the Nasdaq composite fell by 2.1%.
The Dow’s decline now confirms a correction, defined as a 10% drop from a previous peak, following the Nasdaq’s similar move the day before. This week saw the U.S. stock market fluctuate between gains and losses daily, as optimism and pessimism about a potential resolution to the conflict wavered.
On the contrary, Canada’s main stock index closed marginally higher, supported by gains in the basic materials sector. The S&P/TSX composite index ended the day up by 73.13 points at 31,960.65.
After the close of trading on Thursday, President Donald Trump announced a potential extension of the deadline to take action against Iran’s power facilities, offering a slight glimmer of hope. Oil prices initially retreated following this announcement, hinting at a possible return to normalcy in the Strait of Hormuz. However, prices rebounded later in the day.
Despite Trump’s announcement of a delay, hostilities persisted in the Middle East, with Iran showing no signs of backing down and Israel threatening to escalate its attacks. This diplomatic uncertainty between the U.S. and Iran weighed heavily on investors’ sentiment throughout the week.
Oil prices surged, with Brent crude climbing 3.4% to settle at $105.32 US per barrel, up from around $70 before the conflict. Benchmark U.S. crude also rose by 5.5% to $99.64 US per barrel. Concerns loom over potential disruptions in oil and gas production in the Persian Gulf, which could lead to widespread inflation and impact global markets.
If the conflict persists until the end of June, analysts predict oil prices could reach a record $200 US per barrel. On Wall Street, most stocks, including major tech giants like Amazon and Meta Platforms, experienced significant declines. The S&P 500 is now nearly 9% below its peak set earlier in the year.
The global economy remains on edge as the conflict in the Middle East disrupts supply chains and drives up prices across various sectors. Financial markets worldwide are closely monitoring developments and their potential impacts on trade and economic stability.