Wall Street stocks plunged more than 1% on Thursday, driven by a surge in crude oil prices to $100 a barrel. Attacks on tankers off the coast of Iraq and Iran's continued closure of the Strait of Hormuz have reignited fears of hyperinflation.
The financial sector was among the worst hit, falling 1.5% as a crisis of confidence in the $2 trillion private credit market. Morgan Stanley, Blackstone, and BlackRock saw their shares fall after redemptions were imposed to stem capital outflows.
The fall was also felt by fuel-sensitive sectors such as airlines and cruise ship operators, which fell more than 3%. In contrast, energy and chemical stocks posted gains as investors shifted to assets that benefit from global supply chain disruptions.
Geopolitical tensions between the US-Israel and Iran are now forcing analysts such as Goldman Sachs to delay expectations of a Federal Reserve interest rate cut until September. Traders are now forecasting just one rate cut in 2026, compared to two before the conflict erupted.
Despite labor market data showing weekly jobless claims falling, overall sentiment remains negative with falling stocks outstripping advancing stocks by a ratio of 3 to 1. Investors are now on high alert as they await the next steps from Washington and global central banks.
