Dow slides nearly 800 points as oil surges on Iran conflict

US equities closed sharply lower as escalating tensions around Iran rattled markets and pushed energy prices to their highest levels since mid-2024.

The Dow Jones Industrial Average fell 785 points, or 1.6%, after briefly dropping more than 1,100 points earlier in the session. The S&P 500 declined 0.56%, while the Nasdaq Composite slipped 0.26%, trimming earlier losses but still ending the day lower.

Energy markets drove much of the volatility. US crude oil jumped 8.5% to just above $81 per barrel, marking its largest one-day gain since May 2020. Brent crude rose 4.9% to $85.41. Both benchmarks have surged this week as fears grow that the conflict could disrupt shipments through the Strait of Hormuz, a vital route that normally carries around 20% of global oil consumption.

Shipping through the waterway has effectively stalled as insurers and tanker operators avoid the region. Data from S&P Global Commodities at Sea showed no oil tankers transiting the strait on Wednesday, heightening concerns about supply disruptions.

Rising energy prices are also fueling inflation worries. US natural gas futures climbed nearly 3%, while diesel prices jumped around 7%, raising the risk of higher consumer costs and complicating the outlook for the Federal Reserve.

Market volatility increased as investors sought safe-haven assets. The US dollar index rose, while the yield on the 10-year Treasury climbed to around 4.13%, its highest level in three weeks. Wall Street’s volatility gauge, the VIX, surged about 11%.

In equity markets, the Dow’s decline was led by Goldman Sachs and Caterpillar, both down more than 3.5%. The airline sector was also hit, with a major industry ETF falling 4.8%, its worst session since April.

Market Outlook

European markets mirrored the cautious mood, with the Stoxx Europe 600 falling 1.29% and Germany’s DAX losing 1.61%.

Analysts say markets remain highly sensitive to developments in the conflict, particularly whether oil shipments through the Strait of Hormuz can resume and how long the war might last.