U.S. stock markets experienced significant declines on Friday, marking the end of a fifth consecutive week of losses, the longest stretch in nearly four years. The S&P 500 dropped by 1.7%, concluding its worst week since the onset of the conflict with Iran. Similarly, the Dow Jones Industrial Average fell by 793 points, or 1.7%, sliding more than 10% from its previous record established last month, while the Nasdaq composite decreased by 2.1%.
The Dow’s decline now confirms a correction, which is typically defined as a 10% drop from a previous high. Following the Nasdaq, which entered correction territory the day before, the Dow has joined the list of major indexes in this downturn.
Contrary to the fluctuating trends earlier in the week, where the U.S. stock market oscillated between gains and losses based on evolving hopes about the conflict’s resolution, the Canadian main stock index managed to close marginally higher. This was supported by gains in the basic materials sector, with the S&P/TSX composite index finishing at 31,960.65 points, up by 73.13 points.
After the end of Thursday’s trading session, U.S. President Donald Trump extended the deadline for potential military action against Iran’s power facilities to April 6, conditional on the resumption of oil tanker movements through the Strait of Hormuz. Although oil prices initially retreated following Trump’s announcement, they resumed an upward trajectory later in the day.
Despite Trump’s repeated delays this week, conflicts persisted in the Middle East, with Iran showing no signs of backing down and Israel threatening to escalate its actions against Iran. This diplomatic uncertainty between the U.S. and Iran has disheartened investors, leading to diminished risk appetite by the week’s end.
In the event of prolonged conflict until the end of June, analysts at Macquarie anticipate oil prices could surge to $200 per barrel, setting a new record. The fear in financial markets remains centered on potential disruptions in oil and gas production and transportation in the Persian Gulf, which could trigger global inflation and impact various sectors, from fuel prices to transportation costs.
On Wall Street, most stocks faced declines, with the S&P 500 index now 8.7% below its previous peak. Notably, tech giants like Amazon, Meta Platforms, and Nvidia experienced substantial drops, along with non-essential consumer companies such as Norwegian Cruise Line Holdings, Starbucks, and Chipotle Mexican Grill.
Global stock markets reacted with declines in European indexes following mixed results in Asian markets. Meanwhile, Treasury yields fluctuated, with the 10-year Treasury yield climbing to 4.48% before retracting to 4.43%. This surge in yields has already affected mortgage rates and other loans, impacting consumer and business spending, thereby slowing economic growth.
Trump’s decision to reconsider tariffs in response to market pressures, dubbed as “TACO” by critics, highlights the significant role financial markets play in shaping policy decisions. This ongoing volatility underscores the challenges faced by economies worldwide amidst geopolitical tensions and market uncertainties.