Countries caught up in the escalating Iran-US war
More countries are joining the escalating conflict between Iran and the US
U.S. stocks started the day sharply lower, hit by the double blow of a much weaker-than-expected monthly jobs report and escalating tensions in the Middle East.
The U.S. economy unexpectedly shrank by 92,000 jobs in February, and the downwardly revised January payrolls rose by 126,000, far below the 50,000 job growth forecast for the month by economists compiled by Dow Jones. The unemployment rate also rose from 4.3% to 4.4%.
Meanwhile, oil prices rose toward $90 per barrel after President Donald Trump said in a Truth social post that the war with Iran will not end without “unconditional surrender” from the Middle Eastern country. Kuwait has also started cutting production at some oil fields as oil spills have largely stopped and there is no room to store any more oil. Oil prices are on pace for their biggest weekly increase since 2020.
“The last survey of the labor market before the start of the conflict suggested that the labor market was not as strong as January figures indicated, and the longer the conflict drags on, the more negative feedback on economic activity and the labor market is likely to increase,” Kathy Bojancic, chief economist at Nationwide, said in a note.
10:14 a.m. ET. The blue-chip Dow Jones Industrial Average fell 1.44%, or 688.48 points, to 47,266.26, slightly recovering from an earlier drop of 800 points. The broad-based S&P 500 index fell 1.22%, or 83.48 points, to 6,747.23, and the tech-heavy Nasdaq fell 1.02%, or 231.058 points, to 22,517.928. West Texas crude oil soared 8.39% to $87.81 per barrel.
Can stagflation occur?
Stagflation, a situation in which the economy is barely growing but inflation is high, is not a baseline scenario for most economists. But some are now considering it a possibility, depending on how long the fighting in the Middle East continues.
Ellis Osenbaugh, head of investment strategy at JPMorgan Wealth Management, said the weak labor market “makes it harder for the Fed to sell the narrative of labor market stabilization that has been used to justify its patience with further rate cuts.” “Add to the complex job market story high oil prices given the resurgence of conflict in the Middle East and tariff uncertainty, and you have a tricky mix of stagflationary risks for the Fed.”
The benchmark 10-year U.S. Treasury yield was recently at 4.167%, reflecting concerns about inflation.
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.
