NEW YORK (AP) — Oil prices leaped, and stocks slumped Friday on worries that escalating violence following Israel’s attack on Iranian nuclear and military targets could damage the flow of crude around the world, along with the global economy.
The S&P 500 sank 1.1% and wiped out what had been a modest gain for the week. The Dow Jones Industrial Average dropped 769 points, or 1.8%, and the Nasdaq composite lost 1.3%.
The strongest action was in the oil market, where the price of a barrel of benchmark U.S. crude jumped 7.3% to $72.98. Brent crude, the international standard, rose 7% to $74.23 for a barrel.
Iran is one of the world’s major producers of oil, though sanctions by Western countries have limited its sales. If a wider war erupts, it could slow the flow of Iran’s oil to its customers and keep the price of crude and gasoline higher for everyone worldwide.
Beyond the oil coming from Iran, analysts also pointed to the potential for disruptions in the Strait of Hormuz, a relatively narrow waterway off Iran’s coast. Much of the world’s oil that’s been pulled from the ground moves through it on ships.
Past attacks involving Iran and Israel have seen prices for oil spike initially, only to fall later “once it became clear that the situation was not escalating and there was no impact on oil supply,” according to Richard Joswick, head of near-term oil at S&P Global Commodity Insights.
That has Wall Street waiting to see what will come next. U.S. stock prices dropped to their lowest points for the day after Iran launched ballistic missiles toward Israel.
For now, the price of oil has jumped, but it’s still lower than it was earlier this year. “This is an economic shock that nobody really needs, but it is one that seems more like a shock to sentiment than to the fundamentals of the economy,” said Brian Jacobsen, chief economist at Annex Wealth Management.
That in turn sent U.S. stocks to a loss that was notable in size but outside their top 15 for the year so far.
Companies that use a lot of fuel as part of their business and need their customers feeling confident enough to travel fell to some of the sharpest losses. Cruise operator Carnival dropped 4.9%. United Airlines sank 4.4%, and Norwegian Cruise Line Holdings fell 5%.
They helped overshadow gains for U.S. oil producers and other companies that could benefit from increased fighting between Israel and Iran.
Exxon Mobil rose 2.2%, and ConocoPhillips gained 2.4% because the leaping price of crude portends bigger profits for them.
Contractors that make weapons and defense equipment also rallied. Lockheed Martin, Northrop Grumman and RTX all rose more than 3%.
