After the strikes in Iran: oil price surges, stock market declines on Wall Street
The price of Brent crude oil crossed the $94 per barrel mark, and WTI rose to $90. At the same time, stock indices in New York fell by up to 0.9%.
Oil prices recorded sharp increases this Tuesday, while stock indices on the Wall Street stock exchange in New York recorded declines following the exchange of strikes between the USA and Iran. Futures on Brent crude oil rose by more than 4% and crossed the $94 per barrel mark, while American oil (WTI) rose by 4.5% to a level of about $90 per barrel. At the same time, the Dow Jones index fell by 0.8%, the S&P 500 index lost 0.7%, and the Nasdaq index weakened by about 0.9%.
The price changes followed the US announcement of a round of airstrikes on Iranian territory and investor assessments regarding the development of a military conflict in the Persian Gulf. The declines in the indices were recorded after August ended with gains, with the indices holding double-digit returns since the beginning of the year alongside an increase in expectations for company profits. On the other hand, volatility in oil prices, a wave of sales in the bond market, and assessments regarding the interest rate policy of the Federal Reserve are affecting trading ahead of September, which is historically considered a weaker month.
According to a statement by the US Central Command, the wave of strikes was directed against a number of sites in Iran linked to the Revolutionary Guards. Reports in regional media indicated that explosions were heard in the areas around the cities of Bandar Abbas and Chabahar.
US President Donald Trump stated that the action was carried out in response to attempts by the Revolutionary Guards to block the Strait of Hormuz—a shipping route that the US has been working for weeks to clear of mines to allow the passage of vessels—and in response to Iranian attack attempts against targets inside Jordan. Trump said:
"If Iran responds, it will be struck with much greater force. Another major attack is ready, and upon its conclusion, very little will remain of the Islamic Republic."
On the other hand, the Iranian news agency "Tasnim" reported that Iran launched missiles and UAVs towards "enemy targets," although for the time being it is unclear what those targets are. The security events are taking place ahead of the Federal Reserve meeting in September. Fed Chair Kevin Warsh signaled inflation as the bank's primary focus. Markets estimate that an increase in energy prices may lead to an increase in price indices and affect the central bank's interest rate decisions.
