U.S. stock markets experienced significant declines on Friday, marking the end of a fifth consecutive week of losses, the longest such streak in nearly four years. The S&P 500 dropped 1.7%, capping its worst week since the onset of the conflict with Iran. The Dow Jones Industrial Average fell by 793 points, or 1.7%, sliding over 10% from its previous record high. Additionally, the Nasdaq composite witnessed a 2.1% decline.
With the Dow’s recent downturn, it joins the Nasdaq in confirming a correction, defined as a 10% drop from a previous peak. Throughout the week, the U.S. stock market had been alternating between gains and losses as hopes fluctuated regarding a potential resolution to the conflict.
In contrast, Canada’s primary stock index closed marginally higher, supported by gains in the basic materials sector. The S&P/TSX composite index ended the day up 73.13 points at 31,960.65.
Following a challenging day of trading on Thursday, U.S. President Donald Trump extended a deadline to target Iran’s power facilities if the country allows oil tankers to resume passage through the Strait of Hormuz. Although oil prices initially dipped after Trump’s announcement, they resumed an upward trend later in the day.
The ongoing conflict in the Middle East persisted despite Trump’s delay announcement, with Iran showing no signs of backing down and Israel threatening to escalate its actions. This diplomatic uncertainty between the U.S. and Iran negatively impacted investor sentiment by the end of the week.
Oil prices surged, with Brent crude settling at $105.32 US per barrel, up from around $70 US prior to the conflict. Concerns loom over potential disruptions to oil and gas production in the Persian Gulf, which could lead to prolonged inflation and economic repercussions worldwide.
Should the conflict persist until the end of June, analysts project oil prices could skyrocket to $200 US per barrel, a record high. On Wall Street, a majority of stocks witnessed declines, including prominent tech companies like Amazon, Meta Platforms, and Nvidia. Essential goods providers such as Norwegian Cruise Line Holdings, Starbucks, and Chipotle Mexican Grill also faced notable drops.
Global markets experienced a downturn, with European indexes falling after a mixed performance in Asia. Treasury yields fluctuated, with the 10-year Treasury yield climbing to 4.48% before retracting to 4.43%. This rise in yields has already impacted mortgage rates and other loans, potentially slowing down economic growth. The bond market turbulence and escalating Treasury yields have been key concerns, with previous threats of global tariffs by Trump facing criticism amidst market volatility.
