Oil prices surged while global stock markets tumbled on Wednesday following U.S. President Donald Trump’s remarks casting doubt on the temporary truce with Iran. The S&P 500 dropped 0.3% after earlier sinking by 1.1%, and the Dow Jones Industrial Average fell 1.1% as Trump declared the halt to fighting was no longer in place. Meanwhile, the Nasdaq composite initially declined but later rose 0.2% after Trump highlighted that recent hostilities did not signal a return to full-scale conflict.
Canada’s key index, the S&P/TSX, concluded the day with a one percent decrease. Notably, the oil market witnessed significant activity, with Brent crude prices surging by 5.2% to $78.02 US, briefly surpassing the $80 US mark around 4 p.m. ET. Although still below previous highs during the war, this jump is concerning since oil prices had recently normalized post-war escalation.
Concerns linger over the potential blockade of the Strait of Hormuz amid ongoing conflict, which could impede oil shipments globally, exacerbate inflation, and prompt central banks to raise interest rates. Higher rates may curb inflation but may also dampen economic growth and impact various investment categories.
On Wall Street, companies heavily reliant on fuel saw sharp declines, with American Airlines and cruise operator Carnival dropping by four percent and 3.9 percent, respectively. Housing industry stocks also faced downward pressure due to fears of rising Treasury yields impacting mortgage rates.
Despite these losses, some influential artificial intelligence (AI) stocks stabilized after recent volatility, with Nvidia recording a 3.7% increase. These stocks exert notable influence on the market, particularly the S&P 500, given their substantial market presence.
Bond market trends mirrored oil price movements, with Treasury yields increasing. European markets experienced heightened losses after Trump’s ceasefire status comments, with Germany’s DAX and France’s CAC 40 both declining by 2.2%. In Asia, South Korea’s Kospi fell by 5.3%, while Hong Kong’s Hang Seng index notably rose by three percent.
In Hong Kong, shares of Chinese AI startup Zhipu (also known as Z.ai) surged by 13.4%, with its share price soaring over 1,300% since its trading debut in January. This increase comes as a six-month lockup period for initial investors following the debut nears expiration this week.