US Markets See Sharpest Decline Since Start of Iran Conflict
On Thursday, US financial markets recorded their most significant slump since the commencement of the US-Israel war with Iran, driven by escalating oil prices and volatile statements from former President Donald Trump. The Dow Jones Industrial Average closed down 450 points, while the S&P 500 index fell by 1.7%. The technology-focused Nasdaq Composite dropped 2.3%, entering correction territory, defined as a decline of at least 10% from a recent peak.
Oil Price Surge and Economic Impact
Oil prices have risen sharply since the conflict began, reaching levels not observed since the Russian invasion of Ukraine in 2022 and 2023. By the end of trading on Thursday, Brent crude oil, the global benchmark, was approximately $107 per barrel, and US crude oil hit $93 per barrel. According to AAA, average US gasoline prices at the pump reached $3.98 per gallon, reflecting the broader economic strain.
Despite these increases, Trump commented during a cabinet meeting that oil prices "have not gone up as much as I thought." He added, "It’s all going to come back down to where it was, and probably lower," and predicted that the stock market impact would reverse once the conflict concludes.
Market Volatility and Trump's Mixed Signals
Investor confidence has been eroded by Trump's inconsistent messaging regarding US negotiations with Iran. Stocks dipped early on Thursday after Trump posted a warning to Iranian negotiators, stating they "better get serious, before it’s too late" and that "Once that happens, there is NO TURNING BACK, and it won’t be pretty!"
Later in the morning, however, Trump indicated that "very substantial talks" were underway and noted that Iran had allowed 10 oil tankers to pass through the blocked Strait of Hormuz, describing it as a "present" to the US. Following market closure, the White House announced an extension of a pause on strikes against Iranian energy infrastructure by 10 days, until 6 April.
Trump reiterated in an afternoon statement, "Talks are ongoing and, despite erroneous statements to the contrary by the Fake News Media, and others, they are going very well."
Inflation Forecasts and Global Economic Concerns
Concurrently, a new report from the Organization for Economic Cooperation and Development (OECD) estimates that US inflation will average 4.2% this year, compared to about 2.6% in 2025. This increase reverses earlier expectations of strong global economic growth prior to the conflict. Across G20 countries, inflation is projected to be 1.2% higher on average, largely due to elevated oil prices affecting supply chains.
The OECD report highlighted specific concerns, such as the impact of fertilizer prices, which are heavily imported from the region, potentially driving up costs further. It stated, "The evolving conflict in the Middle East has human and economic costs for the countries directly involved, and will test the resilience of the global economy."
This combination of market declines, oil price volatility, and inflationary pressures underscores the broader economic challenges posed by the ongoing geopolitical tensions.
