Live updates: Follow the latest news on US-Iran war
US stocks closed sharply down on Friday, rounding out the fifth consecutive week of declines as the war in Iran drags on and the closure of the Strait of Hormuz threatens the global economy.
The Dow Jones Industrial Average fell 1.7 per cent to 45,167 – meaning it is now in correction territory, or 10 per cent off its February 10 high of 50,513.
The Dow comprises 30 major American blue-chip companies and is considered by many to be a bellwether of the health of the broader market. It appears to be President Donald Trump's preferred gauge, and he frequently bragged about its performance when it passed the 50,000 mark last month.
Driving the sell-off are fears the Iran war will continue for weeks or months to come and will hobble the global economy.
It is not clear if the downturn is a temporary blip that will be followed by a quick recovery – like last year after a sharp sell-off when Mr Trump imposed global tariffs – or the start of a sustained bear market tied to the war.
The Nasdaq 100 Index also fell into correction territory on Friday amid a deepening slump in the shares of technology giants that have powered the bull market for most of the past three years.
The tech-heavy benchmark fell 1.9 per cent to close at 23,132.77, leaving the index down more than 11 per cent from a peak in October.
US crude rose 4.45 per cent to $98.68 a barrel and Brent rose to $112.16 per barrel but they were little changed on the week.
Mr Trump on Thursday sought to downplay the impact of the war on the economy and said the conflict was merely a “little detour”.
“Frankly, I thought the oil prices would go up more, and I thought the stock market would go down more. It hasn't been nearly as severe as I thought,” he said at the start of a Cabinet meeting.
The mantra pushed by the Trump administration is that the conflict might cause short-term pain with higher energy prices and other costs, but things will come roaring back as soon as the war is over.
But even short-term disruptions in the world's shipping and energy networks can trigger supply shocks that create unforeseen negative impacts that may take a long time to recover from.
Disruptions to maritime traffic through the Strait of Hormuz could trigger wider impacts on food security and agricultural production that will last months.
Markets have reacted positively to some of Mr Trump's pronouncements that an end might be in sight for the war, but on Friday they continued their slide after Iran rejected his proposals to end the war he launched together with Israel.
“Clearly, the overall tone has turned very negative and now we have broken down into correction territory,” said Ken Polcari, partner and chief market strategist at Slatestone Wealth in Jupiter, Florida.
“In the end, I would view this as a big opportunity, but would not be surprised if we see a drawdown anywhere between 15 per cent to 20 per cent before it is over.”
