Will the Iran war drag on… Soaring oil prices freeze risk appetite [New York Stock Market Briefing]

All three major U.S. stock indexes fell in lockstep as concerns grew over an escalation of the war involving Iran. Crude prices also surged.

On the 5th (local time), at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average plunged 784.67 points (1.61%) from the previous day to close at 47,954.74. The S&P 500 slipped 38.79 points (0.56%) to 6,830.71, while the Nasdaq Index fell 58.5 points (0.26%) to end at 22,748.99.

By sector, consumer staples, industrials, and materials dropped more than 2%, while real estate and health care fell more than 1%. Only energy, consumer discretionary, and technology were slightly higher.

Investor sentiment appeared to have weakened as geopolitical risks flared again. Earlier, the U.S. declared it would guarantee security in and around the Strait of Hormuz and the Persian Gulf. However, fears are spreading that security has not been ensured in the region, amid reports that an oil tanker was attacked.

Moreover, Iran is also striking neighboring countries. Iran hit refinery facilities in Bahrain with missiles. In the United Arab Emirates (UAE), a drone fell near Al Dhafra Air Base, where U.S. forces are stationed, injuring six people with shrapnel, and energy facilities were engulfed in flames.

The Iraqi Kurdish stronghold also came under Iranian attack. This followed recent phone calls by U.S. President Donald Trump with Iranian and Iraqi Kurdish leaders, in which he suggested that if the Kurds deploy ground forces, extensive U.S. air cover and support would be provided.

As the Iran situation showed signs of becoming protracted, oil prices jumped. West Texas Intermediate (WTI) futures for April delivery settled at $81.01 a barrel, up 8.51% from the previous session. It marked the highest level in 1 year and 8 months since July 2024, and the highest since the launch of Donald Trump’s second administration.

As war-related uncertainty rises, investors’ concerns are also growing. Sam Stovall, chief investment strategist at CFRA Research, said, "Investors are beginning to question whether the U.S. can handle this situation," adding, "Concerns are mounting over whether the U.S. can actually escort all vessels passing through the Strait of Hormuz and what burden that would place on U.S. finances."

Mega-cap tech stocks were mixed, including Nvidia (0.16%), Apple (-0.85%), Microsoft (1.35%), Alphabet (-0.84%), Meta (-1.07%), and Tesla (-0.1%). Software shares were strong as bargain buying came in, such as ServiceNow (5.73%), AppLovin (5.33%), and Salesforce (4.3%).

Berkshire Hathaway rose 2.74%. The move came after the company said it had resumed share buybacks for the first time since 2024, while reports said Chief Executive Officer (CEO) Greg Abel purchased $15 million worth of the company’s shares.

According to the CME FedWatch Tool, fed funds futures priced in a 66.1% probability that the policy rate will be held steady through June. Near the previous session’s close, it was 66.8%.

Jin Young-gi, Hankyung.com reporter young71@hankyung.com