US stocks fell sharply on Friday as investors reacted to escalating tensions in West Asia and rising oil prices. At 9:30 AM ET, Wall Street opened in the red. Dow Jones Industrial Average dropped 399.54 points, or 0.87%, to 45,560.57. S&P 500 fell 58.28 points, or 0.90%, to 6,418.88, while Nasdaq Composite declined 262.18 points, or 1.22%, to 21,145.90.
Oil prices surge
Crude prices climbed as fears of supply disruption deepened. International benchmark Brent crude rose 2% to above $110 per barrel, while US West Texas Intermediate futures gained 2% to trade above $96 a barrel. The surge comes amid increased tensions in West Asia, particularly around the Strait of Hormuz, a critical global oil transit route.
Investor sentiment remains fragile as geopolitical risks continue to mount. Iran’s Islamic Revolutionary Guard Corps has said the Strait of Hormuz is effectively closed.Reports indicate that two Chinese ships were turned away from the Strait and a Thai-flagged cargo vessel struck in the region has run aground. Meanwhile, The Wall Street Journal reported that the Pentagon is considering deploying an additional 10,000 troops to the Middle East.
Mixed signs on diplomacy add to uncertainty
Markets are also reacting to conflicting indicators on potential de-escalation. President Donald Trump announced an extension of the deadline for action against Iran’s energy infrastructure to April 6.
“As per Iranian Government request, please let this statement serve to represent that I am pausing the period of Energy Plant destruction,” Trump said in a Truth Social post. “Talks are ongoing and, despite erroneous statements to the contrary by the Fake News Media, and others, they are going very well. Thank you for your attention to this matter!”
However, uncertainty persists after Iran’s foreign minister reportedly said Tehran has no intention of holding talks with the US, even as its leadership reviews a proposed deal.
Markets already under pressure before Friday’s fall
Friday’s decline follows a weak session on Thursday, when the Nasdaq officially entered correction territory, falling more than 10% from its October peak. The Dow is also nearing correction levels, down over 9% from its all-time high, while the S&P 500 is about 7% below its record.
The ongoing conflict has been a key driver behind the market’s recent weakness, particularly after US and Israeli strikes on Iran’s energy infrastructure on February 28.
Analysts warn of more downside amid uncertainty
Market experts caution that volatility could persist in the near term, with investor sentiment closely tied to geopolitical developments.
“I think we’re headed lower in the medium term until we get some more certainty,” Adam Parker, founder at Trivariate Research, told CNBC on Thursday. “You got to be cautious here and not take a ton of risk in the near term.”
During the week, markets have swung sharply on headlines indicating both escalation and possible diplomatic progress.
“Any signs of positive breakthroughs in terms of discussions with Iran and a cessation of the conflict there would go a long way towards providing some reassurance to investors and a boost in sentiment,” said Jim Baird, chief investment officer with Plante Moran Financial Advisors to Reuters. “Anything that would lead to indications that this might become more long and drawn out, that would be a negative for investor sentiment and certainly would weigh on the market.”
“There’s a lot of uncertainty out there overall,” added James Ragan, co-CIO and director of investment management research at D.A. Davidson. “So as we get into the last couple of days of the quarter, I just think you could see the market sentiment kind of rolling over a little bit.”
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a registered financial advisor in the respective jurisdiction.