Oil prices surged while global stock markets tumbled on Wednesday following U.S. President Donald Trump’s comments casting doubt on the temporary ceasefire in the conflict with Iran.
The S&P 500 dropped 0.3% during the day after declining by as much as 1.1% earlier. The Dow Jones Industrial Average also fell by 1.1% after Trump announced the end of the temporary truce. However, the Nasdaq composite managed to recover from an initial decline and rose by 0.2% after Trump clarified that the recent hostilities did not signal a return to full-scale war.
Canada’s main stock index, the S&P/TSX, finished the day down approximately 1%.
In the oil market, the price of Brent crude per barrel surged by 5.2% to $78.02 US, briefly surpassing $80 US, following Trump’s statements. This spike, although below previous peak levels during the conflict, raised concerns as oil prices had just stabilized prior to the recent escalation.
There are apprehensions that the ongoing conflict could lead to disruptions in the supply chain, particularly if the Strait of Hormuz is blocked, hindering the delivery of crude oil globally. This scenario could potentially exacerbate inflation, contradicting previous expectations of easing inflation due to lower oil prices, prompting central banks to consider raising interest rates.
On Wall Street, companies heavily reliant on fuel experienced significant declines. American Airlines saw a 4% drop, while cruise operator Carnival fell by 3.9%.
Stocks of companies in the housing sector also suffered due to concerns about rising Treasury yields potentially leading to increased mortgage rates, dampening the industry’s prospects.
Conversely, some influential artificial intelligence stocks showed stability, offsetting losses in other sectors. The performance of AI stocks is closely monitored due to their significant impact on the overall market, with companies like Nvidia driving positive momentum.
Treasury yields in the bond market rose alongside oil prices, with the 10-year Treasury yield briefly touching 4.60% before retracting to 4.57%. This marked an increase from the pre-conflict level of 3.97%.
Global stock markets saw heightened losses following Trump’s remarks, with European markets, such as Germany’s DAX and France’s CAC 40, declining by 2.2%. In Asia, South Korea’s Kospi experienced a 5.3% drop amid fluctuating sentiments surrounding AI stocks, while Hong Kong’s Hang Seng index defied the trend and rose by 3%.
In Hong Kong, shares of Chinese AI startup Zhipu surged by 13.4%, with its stock price soaring over 1,300% since its debut earlier this year as a six-month lockup period for initial investors nears expiration.