Wall Street marks its worst week since start of conflict in Iran

U.S. stocks deepened their drops Friday as Wall Street finished off a fifth straight losing week, its longest such streak in nearly four years.

The S&P 500 fell 1.7 per cent to close its worst week since the war with Iran began. The Dow Jones Industrial Average lost 793 points, or 1.7 per cent, and fell more than 10 per cent from its record set last month, while the Nasdaq composite sank 2.1 per cent.

The Dow’s loss makes it the latest major index to confirm a correction, commonly defined as a drop ‌of 10 per cent from a prior high. The Dow follows the Nasdaq, which crossed the correction threshold yesterday.

The losses are a break from Wall Street’s pattern this week, when the U.S. stock market flip-flopped from gains to losses each day as hopes rose and fell about a possible end to the war.

In Canada, however, the country’s main stock index finished narrowly in positive territory, helped by gains in the basic materials sector. The S&P/TSX composite index was up 73.13 points at 31,960.65 at close.

Moments after the U.S. stock market finished its dismal Thursday of trading, U.S President Donald Trump offered another potential signal for hope. He extended a self-imposed deadline to “obliterate” Iran’s power plants to April 6 if it doesn’t allow oil tankers to resume their exits from the Persian Gulf to the open ocean through the Strait of Hormuz.

Oil prices pulled back briefly after Trump’s announcement in a sign of hope in financial markets that some normalcy may return to the Strait of Hormuz. But oil prices resumed their climb as the sun moved westward from Asia to Europe and back to Wall Street.

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Despite Trump’s second announcement of delay this week, fighting continued in the Middle East. Iran gave no signs of backing down, while Israel threatened to “escalate and expand” its attacks on Iran.

“The diplomatic dissonance this week between the U.S. and Iran dismayed investors,” said Doug Beath, global equity strategist at Wells Fargo Investment Institute. “By the end of the week, risk appetite could not withstand the fog of war.”

WATCH | Oil prices keep climbing:

How high could the Iran war take oil prices?

Iran’s blockade of the Strait of Hormuz and attacks on tankers and facilities have pushed oil above $100 US a barrel. Cornell economic historian Nicholas Mulder says it’s ‘reasonable to assume’ prices will keep climbing by a few dollars a day as long as the war continues, potentially topping $120 US by month’s end.

“Any further statements by Trump about a deal are white noise to the markets,” Jim Bianco, president and macro strategist at Bianco Research, wrote in a social media post. “Only if the IRANIANS say the talks are going well will it impact markets.”

The price for a barrel of Brent crude, the international standard, climbed 3.4 per cent to settle at $105.32 US. That’s up from roughly $70 US before the war began. Benchmark U.S. crude rose 5.5 per cent to settle at $99.64 US per barrel.

The fear in financial markets is that the war will disrupt the production and transport of oil and natural gas in the Persian Gulf for a long time. It could keep so much oil and gas out of the world’s markets that it sends a punishing wave of inflation through the global economy.

Not only would it raise prices for drivers buying gasoline, it could push businesses that use any trucks, ships or planes to move their products to raise their own prices. It would also make electricity from gas-fired power plants more expensive.

If the war continues until the end of June, strategists at Macquarie say the price of oil could reach $200 US per barrel, which would be a record.

On Wall Street, most stocks fell, including three out of every four in the S&P 500. The index, which is the main measure of the U.S. stock market’s health, is 8.7 per cent below its all-time high set in January.

Big Tech stocks were among the heaviest weights on the market, including drops of four per cent for Amazon, four per cent for Meta Platforms and 2.2 per cent for Nvidia.

Companies selling things that are not essentials, which customers could stop buying if they’re pinched, also sank sharply. Norwegian Cruise Line Holdings lost 6.9 per cent, Starbucks dropped 4.8 per cent and Chipotle Mexican Grill sank 4.1 per cent.

In stock markets abroad, indexes fell in Europe following a mixed finish in Asia.

In the bond market, Treasury yields swiveled. The yield for the 10-year Treasury rose as high as 4.48 per cent before pulling back to to 4.43 per cent. That’s up from 4.42 per cent late Thursday and from just 3.97 per cent before the war began.

That rise has already sent rates jumping for mortgages and for other loans taken by U.S. households and businesses, slowing the economy.

High Treasury yields and disruption in the bond market were big factors that Trump named a year ago when he backed off his initial threats for global tariffs made on “Liberation Day.” The moves caused critics to allege Trump always chickens out, or “TACO,” if financial markets show enough pain.