Stocks fall, oil rises after Trump’s latest delay in the Iran war fails to raise hopes

US stocks are falling on Friday as Wall Street stumbles toward the finish of a fifth straight losing week, which would be its longest such streak in nearly four years.

The S&P 500 sank 1% and deepened its losses a day after its worst drop since the war with Iran began. The Dow Jones Industrial Average was down 428 points, or 0.9%, as of 10:45 a.m. Eastern time, and the Nasdaq composite was 1.4% lower.

The losses are a break from Wall Street’s pattern this week, where the US stock market flip-flopped from gains to losses each day as hopes rose and fell about a possible end to the war.

Moments after the US stock market’s dismal Thursday of trading finished, President Donald Trump offered another potential signal for hope. He extended a self-imposed deadline to “obliterate” Iran’s power plants to April 6 if it doesn’t allow oil tankers to resume their exits from the Gulf to the open ocean through the Strait of Hormuz.

Oil prices eased immediately afterward in a sign of hope in financial markets that some normalcy may return to the strait. It was similar to the optimism that swept global markets after Trump said Monday, just before Wall Street opened for trading, that the United States and Iran had held productive talks.

But oil prices resumed their climb as the sun moved westward from Asia to Europe and back to Wall Street on Friday. Despite Trump’s latest announcement of a delay, fighting continued in the Middle East. Iran gave no signs of backing down, while Israel threatened to “escalate and expand” its attacks on Iran.

“The diplomatic dissonance this week between the US and Iran dismayed investors,” said Doug Beath, global equity strategist at Wells Fargo Investment Institute. “By the end of the week, risk appetite could not withstand the fog of war.”

“Any further statements by Trump about a deal are white noise to the markets,” Jim Bianco, president and macro strategist at Bianco Research, wrote in a social media post. “Only if the IRANIANS say the talks are going well will it impact markets.” The price for a barrel of Brent crude rose 1.8% to $103.69 and is up from roughly $70 before the war began. Benchmark US crude rose 3.8% to $98.04 per barrel.

The fear in financial markets is that the war will disrupt the  Gulf’s energy industry for a long time. It could keep so much oil and natural gas out of the world’s markets that it sends a punishing wave of inflation through the global economy. Not only would it raise prices for drivers buying gasoline, it could push businesses that use any trucks, ships or planes to move their products to raise their own prices. It would also make electricity from gas-fired power plants more expensive.

If the war continues until the end of June, strategists at Macquarie say the price of oil could reach $200 per barrel. The record is just above $147, reached during the summer of 2008. That’s when Iran’s testing of missiles, including one that could reach Israel, and strong demand for oil from China helped send prices spiking despite the Great Recession.

High gasoline prices and the war are already hitting confidence among US consumers, whose spending makes up the bulk of the economy. Sentiment among them fell slightly more in March from February than economists expected, according to a survey by the University of Michigan.

US consumers also said in the survey that they’re worried about inflation jumping in the near future. They’re bracing for inflation of 3.8% in the coming 12 months, up from 3.4% in February. It’s the largest one-month increase in nearly a year.

Expectations of higher inflation can kick off a vicious cycle of behaviour that only worsens inflation. Such worries have virtually eliminated hopes among traders that the Federal Reserve could cut interest rates this year to boost the economy. While lower rates would give the job market and prices for investments an upward jolt, they would also risk making inflation worse.

Long-term Treasury yields climbed further in the bond market following Friday’s rise for oil prices. The yield for the 10-year Treasury rose to 4.43% from 4.42% late Thursday and from just 3.97% before the war began.

That rise has already sent rates jumping for mortgages and for other loans taken by US households and businesses, slowing the economy.

On Wall Street, most stocks fell, including seven out of every 10 in the S&P 500. The index, which is the main measure of the US stock market’s health, is all the way back to where it was in August and 8.1% below its all-time high set early this year.

Big Tech stocks were among the heaviest weights on the market, including drops of 1.8% for Nvidia and 2.9% for Amazon.

Agencies