Oil prices surged and stocks fell Tuesday morning as the United States launched new strikes on Iran’s Kharg Island and President Donald Trump’s 8 p.m. ET deadline to reopen the Strait of Hormuz approached without any clear resolution.
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The price of US crude oil jumped more than 4% to $116 a barrel. International Brent crude oil rose to about $111 a barrel.
Meanwhile, stocks fell as the opening bell rang. The S&P 500 fell 0.4% and the Nasdaq Composite dropped 0.8%. The Dow fell 275 points, or 0.5%, and the Russell 2000 index, which tracks smaller companies, fell 0.4%.
The decline followed relatively soft overnight trading. On Tuesday morning, a US official confirmed new attacks on Iran’s Kharg Island, from where Iran exports about 90% of its crude oil.
The US first attacked the island on March 13. At the time, Trump wrote on social media that “every military target in Iran’s crown jewel, Kharg Island” had been “completely destroyed.”
An official told NBC News that Tuesday’s attacks were focused on military facilities and did not affect energy infrastructure on the island.
“Oil prices remain a key driver as investors grapple with broader supply shocks, while also anticipating an easing of the Middle East conflict and a reduction in supply chain disruptions,” BlackRock analysts said on Monday.
As of Tuesday morning, the average price per gallon of retail gasoline was $4.14. The average price per gallon of diesel fuel was $5.64, close to an all-time high of $5.82 in 2022.
At the same time, Trump continued to increase his threats against Iran.
Earlier Tuesday, he wrote on Truth Social that “an entire civilization will die tonight” if a deal is not reached with Iran and the Strait of Hormuz is not reopened by his deadline.
However, market participants will likely be paying close attention to Trump’s latest post. It ends with Trump indicating that “clever and less radical minds will probably prevail” in US negotiations with Iran’s current leaders.
Since the war with Iran began on February 28, Trump has repeatedly announced plans to halt attacks or pursue negotiations just ahead of his own set deadline.
“Barring any movement on the diplomatic front, it will be difficult for investors to take on much risk ahead of the president’s 8 p.m. deadline,” analysts at Bespoke Investment Group wrote in a note. “At no time will Taco Tuesday be more welcomed than today, but the President has shown no signs of backing down,” he said, referring to the oft-used term. wall street abbreviation It stands for “Trump Always Chickens Out.”
Constant headlines and social media posts from the President have caused the price of oil to rise since the war began.
“The strategic picture has hardened into two divergent paths,” Societe Generale analysts wrote. “Either we get a fragile detente – no ground war, controlled escalation, gradual supply recovery – or a protracted conflict with boots on the ground and structurally high risk premiums, as countries respond with excessive stockpiling.”
“US signaling is now leaning towards the latter,” he said.
