World oil prices soar after Israel’s attack on Iran
World oil prices soared after Israel launched an attack on Iran, raising concerns about an escalation of conflict in the Middle East.
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U.S. stocks slumped as oil prices soared on the first trading day since the U.S. and Israel attacked Iran.
President Donald Trump said on February 28 that the United States and Israel had launched an attack on Iran, killing the country’s supreme leader Ayatollah Khamenei and dozens of senior government officials and hitting more than 1,000 targets in the country. Iran retaliated with attacks on U.S. military bases, Israel and other countries in the Middle East.
News of the strike almost immediately pushed oil prices higher as investors factored in disruptions to oil supplies through the Strait of Hormuz, through which about a fifth of the world’s crude oil shipments pass. Iran also supplies about 4% of the world’s oil.
At 10:36 a.m. ET, West Texas crude oil prices were last up 6.74%, or $4.52, to $71.54 per barrel.
A prolonged rise in oil prices could fuel inflation concerns, weighing on stock prices. The blue-chip Dow Jones Industrial Average fell 0.41%, or 200.4 points, to 48,777.52, and the S&P 500 composite index fell 0.31%, or 21.01 points, to 6,857.87. The tech-heavy Nasdaq fell 0.08% (17.676 points) to 22,650.536.
However, some market analysts said the initial reaction could fade as investors remain on the sidelines until a clearer picture of the situation in the Middle East emerges.
“Early polling suggests that voters are taking a ‘wait-and-see’ attitude toward U.S. aggression in the Middle East,” said Brian Gardner, chief Washington policy strategist at Stifel. “However, depending on the length and details of the battle, oil prices and other affordability indicators could begin to rise sustainably.”
“Although it is difficult to predict the duration and impact of disputes, focusing on what is known can help provide perspective for investors. Over the past 15 years, “Several geopolitical shocks have caused oil prices to rise, with limited impact on the market. Oil prices tend to rise in advance of these events. Markets may have already priced in much of the risk, and prices could fall from here.”
He also reminded investors that the global oil market is in oversupply and the Trump administration is “strongly incentivized to avoid sustained increases in oil prices leading up to the November election.”
Are there any hidden opportunities?
Some market experts say if you can stomach the volatility and perhaps short-term downside, you should always be on the lookout for opportunities to jump into stocks.
“Given that the market has struggled to rally on good news recently, this could set off a negative chain reaction that could push the market into correction territory,” said Jay Woods, chief market strategist at Freedom Capital Markets. “Experiencing a correction is never fun. There’s always a trigger for a decline, this time the Iran conflict. The silver lining is that these market disruptions often present opportunities if you know where to look.”
Woods said it may be too early to find gems, but Adrian Helfert, Westwood’s chief investment officer for multi-asset strategies, said diversification could help weather the volatility.
“Since 1990, in similar events, continuing to invest has been the right decision,” he said. “There have been five similar geopolitical shocks, and in four out of five, stock prices rose 12 months later. Historically, selling in an initial panic has been the costliest decision an investor can make.”
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
