The price of oil surged more than 4% Wednesday after President Donald Trump said the U.S. ceasefire deal with Iran was “over” and the United States was planning additional strikes.
Meanwhile, U.S. stocks fell Wednesday, compounding a sell-off Tuesday fueled by concerns about chip and tech stocks. However, the Nasdaq ended the day higher as the semiconductor sector rebounded.
The S&P 500 closed down 0.3% and the Dow Industrial Average fell 577 points. The Russell 2000 index, which tracks small- and mid-cap companies, tumbled 0.9%.
The price of U.S. crude oil jumped as high as $76 per barrel in the wake of Trump’s comments, its largest one-day move up since the beginning of June. It closed the day higher by 4.4%, at $73.52 per barrel, bringing its two-day gain to more than 7%.
International benchmark Brent crude oil also spiked, rising as high as $80 per barrel, but it wrapped up the day at $78.02, up 5.2%.
“I think it’s over,” Trump said about the ceasefire on the sidelines of the NATO summit in Ankara, Turkey. “I don’t want to deal with them anymore.”
Trump said that negotiations could continue but that he considered them a “waste of time.”
American forces will “probably hit [Iran] again tonight,” Trump said later in the morning, adding that the U.S. military “may take over Kharg Island,” an export hub for Iranian crude oil. Likewise, he floated reimposing the American naval blockade on Iranian ships in the Strait of Hormuz.
Energy prices jumped one day after jitters returned to oil markets, sending U.S. crude oil prices from about $69 to more than $72. Heating oil prices, a proxy for jet fuel, also climbed 11%. Wholesale gas futures rose 5%.
The rapid rise in oil prices also underscores the fragility of the recent drop in U.S. consumer gas prices. The national average price per gallon had fallen from a high of $4.56 in May to $3.79 as of Wednesday morning. But the drop has effectively come to a halt this week, and the national average has remained flat over the last two days, according to AAA data tracked by NBC News.
Government bonds also sold off, driving yields higher. The 10-year U.S. Treasury yield rose as high as nearly 4.6%, its highest level since May.
Airline stocks were some of the hardest-hit shares Wednesday. United Airlines, Delta Air Lines and Southwest Airlines fell around 1.5%. Other travel stocks, such as Booking Holdings and Carnival, fell around 4%.
With oil prices rising again and inflation fears returning to the forefront, other companies that rely on discretionary consumer spending also tumbled. DoorDash and American Express fell 4%, Home Depot fell 2.6%, and Procter & Gamble and McDonald’s dropped around 2%.
Global stocks also sold off, with flagship indexes in Spain, Germany and France closing down more than 2%. Benchmark indexes in Italy and the U.K. ended lower by around 1.5%.
On Tuesday, the U.S. said Iran struck three commercial vessels near the Strait of Hormuz. Tehran has not claimed responsibility for the attacks.
Later in the day, the U.S. Treasury revoked a sanctions waiver that allowed Iranian oil to be sold into the global market and U.S. Central Command launched “a series of powerful strikes against Iran” in retaliation for the vessel attacks.
“Renewed tensions in the Middle East have interrupted what had become an increasingly complacent market narrative, prompting investors to reassess geopolitical risks after several weeks of pricing in a smooth path toward de-escalation,” Capital.com market analyst Daniela Hathorn said in a note Wednesday morning.
“The latest attacks have lifted oil prices, weighed on equity markets and reminded investors that while a ceasefire remains in place, a lasting agreement between the US and Iran is far from guaranteed,” she added.
After the U.S. and Iran signed a memorandum of understanding in mid-June, U.S. oil prices stabilized around $69 to $70 per barrel and remained there for the better part of three weeks.
“For markets and the global economy, the prospect of a swift return to pre-conflict energy and goods flows through the waterway is fading,” said Geoff Yu, senior market strategist at BNY.
