[New York Stocks] WTI Surges Past $80 on Tanker Attack... Major Indexes Plunge

Dow Drops 1.61% at Close
Oil Prices Surge After Iran Attacks Oil Tanker

AFP Yonhap News

All three major indices on the New York Stock Exchange closed lower on March 5 (local time), as international oil prices surged following reports that an oil tanker was attacked in Iraqi territorial waters.

On the same day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell by 784.67 points, or 1.61%, to close at 47,954.74. The large-cap-focused S&P 500 Index dropped by 38.79 points (0.56%), and the tech-heavy Nasdaq Index declined by 58.498 points (0.26%), both ending the session lower.

The market reacted sharply to reports that an oil tanker anchored in Iraqi territorial waters was attacked. Although all crew members were unharmed, Iran claimed responsibility for the attack, significantly denting investor sentiment.

Previously, Iran's Revolutionary Guard had threatened to "close the Strait of Hormuz," vowing to burn all oil tankers passing through the strait. The Strait of Hormuz is a critical passageway for 20% of the world's oil transport.

With an actual explosion involving an oil tanker occurring in this region and traffic coming to a standstill, concerns over energy transport became more pronounced, which appears to have driven the indices lower.

In fact, West Texas Intermediate (WTI) crude oil closed at $81.01 per barrel, up 8.51% from the previous session. Brent crude rose by 4.93% to close at $85.41 per barrel. CNBC reported that oil prices have soared by about 21% this week.

Retail gasoline prices in the United States were also affected by the aftermath of the conflict. According to the American Automobile Association (AAA), retail gasoline prices rose by about 27 cents from the previous week, reaching an average of $3.25 per gallon. This is the first time since March 2022, when Russia invaded Ukraine, that prices have reached this level.

In response, U.S. Secretary of the Interior Doug Burgum stated that various measures are being considered to address the sharp rise in oil and gasoline prices. He said, "We are reviewing all possibilities, and I am aware that there are several ideas on the table."

Refining stocks such as ExxonMobil rose by 0.42% and Chevron by 1.83%. In contrast, airline stocks plunged amid signs of escalating war with Iran, with Delta down 3.99%, American Airlines down 5.46%, and United Airlines down 4.96%.

Additionally, major semiconductor stocks were weak following reports that the United States is considering implementing a permit system for the sale of artificial intelligence (AI) chips. Nvidia, the company with the largest market capitalization, fell 0.13%, and TSMC dropped 1.18%. Nvidia reportedly decided to halt production of its H200 AI chips for export to China and will instead produce next-generation chips.

U.S. Treasury yields also surged in response to rising international oil prices. This is due to concerns that higher oil prices could increase inflationary pressure, burdening the Federal Reserve's potential interest rate cuts.

The 10-year U.S. Treasury yield rose by 5.6 basis points (1 bp = 0.01 percentage point) from the previous session to 4.139%, up for a fourth consecutive trading day. The 30-year Treasury yield also rose by 3.7 basis points to 4.754%.

JP Morgan Market Intelligence, led by Andrew Tyler, stated, "With inflation expectations heightened by rising energy prices, strong economic indicators are preferable," adding, "Expectations for interest rate cuts may rise, but there is a risk of stagflation in the short term."

However, if the war with Iran is short-lived, oil prices are expected to stabilize. Chris Senyek of Wolfe Research analyzed, "If the conflict is resolved within the next few weeks, the surge in oil prices is likely to be temporary," adding, "Brent crude futures could fall back to around $65 per barrel."

This content was produced with the assistance of AI translation services.