Oil jumped on Thursday while stocks stumbled, as mixed messages from US President Donald Trump failed to convince traders that the prospect of talks with Iran will quickly end the war in the Middle East.
Brent rose 5.7 per cent to close just over $108 a barrel and West Texas Intermediate, the benchmark for US crude, climbed 4.6 per cent after Mr Trump said he does not know if the US is “willing” to work with Iran on a deal. The month-long conflict has roiled global energy markets, hitting Asia especially hard, and could cause inflation to surge worldwide.
Prices pared back some gains before mostly recovering in after-market trading when Mr Trump announced the US will extend its deadline for talks with Iran until April 6 before striking the country’s power plants. He again threatened Iran with increased military action if a deal is not struck.
Four of the six largest swings ever seen in international oil benchmark Brent futures have come since the war started at the end of February. Now, as traders struggle to adjust their exposure and protect their positions, evidence is growing that liquidity is thinning, which threatens to worsen the situation.
As the conflict drags on – with Israel launching new strikes at the Iranian city of Isfahan, and Tehran retaliating – governments across Asia are preparing for worst-case scenarios. Thailand’s petrol prices increased by as much as 22 per cent; the Philippines suspended the nation’s wholesale electricity spot market; and farmers in India and China struggled with surging costs of agrochemicals.
Meanwhile, the Nasdaq tumbled more than 2 per cent to confirm a correction on Thursday, while the S&P 500 and the Dow fell more than 1 per cent.
Thursday marked the biggest one-day decline for the Nasdaq and the S&P 500 since January 20.
Stock indexes erased gains from Wednesday when investors had been betting on a de-escalation in the war, which has disrupted oil shipments through the Strait of Hormuz.
The Dow Jones Industrial Average fell 469.38 points, or 1.01 per cent, to 45,960.11; the S&P 500 lost 114.74 points, or 1.74 per cent, to 6,477.16; and the Nasdaq Composite shed 521.74 points, or 2.38 per cent, to 21,408.08.
The technology-heavy Nasdaq closed down 10.7 per cent from its October 29 closing record high, confirming it has been in a correction since that date. A correction is a decline of 10 per cent or more from a recent market high.
Most of the S&P 500's 11 major industry sectors lost ground. Energy was the biggest gainer, adding 1.6 per cent. The only other sector to show a percentage gain was defensive utilities, which added 0.2 per cent.
The biggest sector laggers were communications services, down 3.5 per cent, and technology, which lost 2.7 per cent.
The communications index was under pressure after jurors found Meta and Alphabet's Google liable in the first two trials from a growing wave of lawsuits accusing social media companies of harming children. Meta shares finished close to 8 per cent lower while Alphabet lost more than 3 per cent.
