Oil Jumps 7.3% as Israel-Iran Tensions Spark Market Selloff

Oil prices surged and major U.S. stock indexes experienced significant declines on Friday, driven by escalating tensions following Israel’s attack on Iranian nuclear and military targets. The S&P 500 fell by 1.1%, the Dow Jones Industrial Average dropped by 1.8%, and the Nasdaq Composite sank by 1.3%. The most pronounced impact was seen in the oil market, where the price of a barrel of benchmark U.S. crude jumped by 7.3% to $72.98, while Brent crude, the international standard, rose by 7% to $74.23 per barrel.

Iran, a major global oil producer, has seen its sales limited by Western sanctions. The potential for a wider conflict could disrupt the flow of Iranian oil to its customers, leading to higher crude and gasoline prices worldwide. Additionally, analysts highlighted the risk of disruptions in the Strait of Hormuz, a critical waterway through which much of the world’s oil is transported.

Historically, past attacks involving Iran and Israel have resulted in initial spikes in oil prices, which later subsided as the situation stabilized and oil supply remained unaffected. This pattern has led Wall Street to adopt a wait-and-see approach, with U.S. stock prices dropping to their lowest points for the day as Iran’s state-run news site reported the launch of ballistic missiles towards Israel.

Despite the jump in oil prices, they remain lower than earlier this year. Analysts view this as an economic shock that primarily affects sentiment rather than the fundamental economy. This sentiment shift has led to a decline in U.S. stocks, eroding some of their recent gains that had brought them close to record highs.

Companies heavily reliant on fuel and customer confidence, such as cruise operators and airlines, experienced some of the sharpest losses. Carnival Corporation dropped by 5%, United Airlines sank by 4.5%, and Norwegian Cruise Line Holdings fell by 5%. These declines overshadowed gains for U.S. oil producers and defense contractors, which benefited from the increased fighting between Israel and Iran. Exxon Mobil rose by 2.1%, and ConocoPhillips gained by 1.9%, while defense contractors also saw significant increases.

The price of gold climbed as investors sought safer havens for their cash, with an ounce of gold adding 1.5%. Typically, Treasury bond prices rise during times of investor nervousness, as U.S. government bonds are seen as safe investments. However, Treasury prices fell on Friday, pushing up their yields, partly due to concerns that higher oil prices could drive inflation. Inflation has been relatively stable, near the Federal Reserve’s target of 2%, but worries persist that it could accelerate due to tariffs imposed by President Donald Trump.

This concern sent the yield on the 10-year Treasury up to 4.42% from 4.36% late Thursday. Higher yields can negatively impact stock and other investment prices, making borrowing more expensive for U.S. companies and households. A report suggesting an unexpectedly large increase in U.S. consumer sentiment also contributed to higher yields. The preliminary report from the University of Michigan indicated improved sentiment for the first time in six months, following the pause on many of Trump’s tariffs and easing expectations for future inflation.

On Wall Street, Adobe fell by 5.2% despite reporting a stronger profit for the latest quarter than expected. Analysts described the performance as solid but noted that investors may have anticipated larger increases in revenue forecasts for the upcoming year. Shares of Brazilian meat giant JBS fell by 4.4% on their debut on the New York Stock Exchange, as the company seeks to increase access to its shares among global investors despite criticism from environmental groups and lawmakers.

Stock markets abroad also experienced declines, with indexes slumping across Europe and Asia. France’s CAC 40 lost 1%, and Germany’s DAX dropped by 1.1%, among the larger losses. The overall market reaction reflects the heightened geopolitical risks and their potential impact on global economic stability.