Oil Prices Are Surging—And It's Making Stock Investors Anxious. Here's Why.

Key Takeaways

• Major stock indexes fell Thursday as the price of oil jumped on concerns about a possible supply shock.
• Investors fear that supply disruptions could spur inflation, weighing on economic activity and corporate profits.

Stocks tumbled again Thursday. You can blame the price of oil.

All three major U.S. indexes finished lower, with Dow Jones Industrial Average dropping nearly 800 points. (Read Investopedia’s full coverage of today’s trading here.) What’s going up? Brent crude, the global oil benchmark, was recently at prices last seen in 2024.

Rising oil prices, fueled by ongoing conflict in the Middle East—and, particularly, disruptions in the Strait of Hormuz, a key maritime shipping route—have fanned concerns of a supply shock that could spark inflation and weigh on economic activity. That has lifted shares of energy companies but otherwise weighed on stocks broadly, unwinding some of the runup indexes had seen as investors shifted away from tech and toward comparably defensive stocks.

Why This Matters to Investors

Part of the investor concern regarding conflict in the Middle East comes down to the search for clarity about the path ahead. Developments in and around Iran have injected fresh uncertainty into the outlook for stocks, businesses, and even inflation and interest rates.

“Iran doesn’t need to sink a single U.S. warship,” BCA Research wrote Thursday. “It could inflict much more damage by sinking the U.S. stock and bond markets by disrupting shipping, trade, and oil tankers.”

The move lower in the Dow pulled a range of shares downward, with most of the Dow’s blue-chip components in retreat. Goldman Sachs (GS), Caterpillar (CAT), Amgen (AMGN), Sherwin Williams (SHW) and Walmart (WMT)—a bank, an industrial equipment maker, a drug company, a paint producer and a big retailer—each dropped more than 3%.

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“We really have no idea how long this is going to take,” said Dan Greenhaus, chief strategist at Solus Alternative Asset Management, on CNBC of U.S. operations in Iran. “That level of uncertainty… and the issues in the Straight of Hormuz really raise some concerns in markets, and it’s why oil is not $60—it’s now $80.”

Brent crude futures were trading at just above $84 per barrel late Thursday. The price has risen 16% since the U.S. and Israel on Saturday launched attacks on Iran that sparked a broader armed conflict in the Middle East.

Worries that higher oil prices will hit companies’ bottom lines aren’t the whole story. Investors increasingly also worry that they might induce a surge in inflation that would cause the Federal Reserve to delay interest-rate cuts, a dynamic that likely weighed on tech shares Thursday.

While oil rose, gold—traditionally seen as a hedge against uncertainty—fell. So did bitcoin, which gave back some ground gained earlier in the week on regulatory optimism.

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