Oil prices surged Thursday, threatening to further push up the price of gas, as hopes for a near-term resolution to the Iran war faded following President Donald Trump’s address to the nation.
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Stocks resumed their turbulent swings, with the major indexes moving sharply on mixed headlines about the Middle East conflict.
After dropping sharply to start the day, U.S. indexes almost entirely recovered their losses after the Iranian deputy foreign minister said that Iran intends to outline a “new navigation regime” in the Strait of Hormuz after the war ended, according to an NBC News translation of his comments. That news appeared to inject fresh optimism into markets over the future of the key waterway.
As of 2:00 p.m. ET, the S&P 500 was down 0.3%, the Nasdaq Composite was lower by only 0.4% and the Dow Jones Industrial Average traded lower by 200 points. The Russell 2000 index, which tracks smaller companies, rose slightly.
In a contrast to stocks, oil was little moved by the comments from Iran about the future of the Strait of Hormuz.
U.S. crude oil remained higher by 12% to more than $112 per barrel. Brent, the international oil benchmark, was up 8% to more than $109 per barrel.
In his speech Wednesday, Trump said the war would end “shortly,” but he pledged to conduct additional “extremely hard” strikes on Iran “over the next two to three weeks.”
Missing from Trump’s address was any structured path to a ceasefire. He likewise did not put forth a plan to reopen the Strait of Hormuz, through which more than 20% of the world’s oil supply typically passes. “The strait will open up naturally,” he said.
The president also emphasized that the war will continue until the U.S. military’s objectives were “fully achieved.”
Oil prices began rising while Trump was speaking Wednesday night and have kept climbing since, reversing two days of declines.
On Thursday, the national average price per gallon of unleaded gas hit $4.08, up from $2.98 before the war.
“Motorists could start seeing oil’s surge show up at the pump starting around mid-day” Thursday, GasBuddy analyst Patrick De Haan said on X.
The “markets wanted something different,” UBS Global Wealth Management CIO Paul Donovan wrote in a note Thursday. “U.S. escalation (however short-lived) risks being met with an Iranian response, threatening more infrastructure damage in the Gulf.”
On Thursday, British Foreign Secretary Yvette Cooper hosted a video call with 35 nations, including a number of Gulf states, to discuss how to reopen the Strait of Hormuz. The United States did not attend that meeting, according to Reuters.
On the call, Cooper indicated that the war would need to ease before deploying “our collective defensive military capabilities,” according to NBC News partner Sky News.
U.S. government bonds traded around breakeven, and yields dipped slightly lower. But the spike in energy prices continues to cause fears over renewed inflation and yields have risen significantly since it began from around 3.96% on Feb. 27 to about 4.30% on Thursday.
Currently, a 30-year fixed rate mortgage is averaging 6.41%. The day before the war began, the average rate was 5.99%, according to Mortgage News Daily.
On Wednesday, Bank of America analysts predicted that headline inflation as measured by the Federal Reserve’s favored PCE index would “surge imminently” and peak at close to 4% this quarter. PCE was 2.8% in January, its most recent update.
Inflation has already started jumping overseas. Eurozone inflation in March surged to 2.5%, from 1.9% in February.
Thursday also marks the final trading session of the week for equities and stock futures, because U.S. markets will be closed for Good Friday.
Often before a long weekend, and especially during times of geopolitical unrest, selling pressure can increase from investors who don’t want to risk being trapped in an investment for three days straight while events on the ground are moving swiftly.
