Stocks plunged lower on Thursday, with the Dow Jones Industrial Average (NYSE: DIA) slumping below the 47,000 threshold for the first time this year, as concerns over energy supply disruptions in the Middle East continued to cloud investor outlooks.
The 30-stock index dropped nearly 740 points on Thursday to close at 46,677.85. The S&P 500 Index (NYSE: SPY) also fell 1.5% and the Nasdaq Composite (NASDAQ: QQQ) lost 1.8% to end the session at 6,672.62 and 22,311.97, respectively -- all three major averages recorded fresh lows for the year.
Driving markets lower, crude oil futures continued to spike on Thursday as Iran's new supreme leader Mojataba Khamenei said in his first public statement since being appointed that the Strait of Hormuz should remain closed to act as a "tool to pressure" the United States. Khamenei also called for all U.S. military bases in the Middle East to close immediate and said "those bases will be attacked," according to translations by Reuters, signaling another escalation in the war between Washington and Tehran.
West Texas Intermediate crude futures rose above 9% to settle at $95.73 per barrel, while Brent crude futures -- an international benchmark -- also rose 9% to close at $100.46 per barrel, marking its first time above $100 since August 2022.
These jumps in oil futures come even as countries agree to release millions of barrel from their reserves to support supply disruptions. U.S. Energy Secretary Chris Wright announced late Wednesday that the U.S. will release 172 million barrels of oil starting net week, taking roughly 120 days to fully deliver. This release is part of the International Energy Agency's record release of 400 million barrels of oil from member countries announced on Wednesday.
The shockwaves from the war are expected to have little impact on the Federal Reserve's policy decision due next week, according to Moody's Chief Economist Mark Zandi in a Thursday note. This view is supported by the major of market participants, according to CME Group's FedWatch tool, showing nearly 100% of those surveyed expecting policymakers to hold interest rates at their current range of of 3.50% to 3.75%.
"Fed officials will sit on their hangs until they get clarity around how the war with Iran is playing out and which of its mandates, low and stable inflation or full-employment, is most in jeopardy," Zandi wrote, adding that it "could take weeks, if not two to three months."
Looking ahead, investors will continue to monitor updates surrounding the U.S.-Iran war on Friday. Key economic reports due out in the morning include January's personal consumption expenditures and job openings readings, and March's preliminary consumer sentiment report.