The U.S. stock market faced headwinds on Thursday as rising oil prices stoked concerns about a potential conflict between the United States and Iran. The S&P 500 dipped 0.4%, while the Dow Jones Industrial Average slid 0.5% and the Nasdaq Composite fell 0.6%.
What's driving this market jitters? Reuters reports that President Donald Trump has been weighing whether to take military action against Iran, raising the specter of a broader conflict in the Middle East that could disrupt global oil supplies. Benchmark U.S. crude oil prices topped $66 per barrel, the highest level since last summer.
Sectors Feeling the Pressure
The oil price surge had a ripple effect across the market, with energy stocks posting some of the biggest gains. However, the broader market was weighed down by mixed earnings reports and concerns about the impact of rising energy costs.
Booking Holdings, the parent company of Booking.com and Priceline, dropped 8% despite topping analysts' profit expectations. The New York Times reports that investors are worried about the threat of AI-powered competitors disrupting the online travel industry.
Carvana, an online used car retailer, also fell 4.3% even after reporting stronger-than-expected profits. Investors were more focused on the company's lower-than-anticipated profit margins per vehicle sold.
Walmart Delivers, but Outlook Disappoints
One bright spot was Walmart, which rose 1.6% after the retail giant reported better-than-expected results for the end of its fiscal year. CNBC reports that Walmart's strong holiday performance was driven by lower prices that attracted a wider range of customers. However, the company's profit forecast for the upcoming year fell short of analysts' estimates, tempering investor enthusiasm.
The bigger picture here is that the market remains on edge, with investors quick to punish any signs of weakness amid broader economic uncertainty. The oil price spike is only exacerbating those concerns, raising the specter of higher inflation and the potential for more aggressive action by the Federal Reserve.
As The Economist explains, the geopolitical tensions with Iran come at a time when global oil supplies remain tight, increasing the potential for price volatility. This is a trend that bears close watching in the weeks and months ahead.