Oil surges to $100 as markets drop and Trump’s Wall Street reassurance falters
The Impact of the Iran Conflict on Financial Markets
President Donald Trump has long been known for his ability to influence financial markets. However, with the ongoing conflict in Iran, it seems that his power may be reaching its limits. The S&P 500 experienced a significant drop, closing down 1.7% and marking its fifth consecutive weekly decline. This is the worst stretch since 2022 and reflects a growing lack of confidence in a quick resolution to the conflict.
Since the U.S. launched an attack on Iran on February 28, the S&P 500 has declined by approximately 7%, while the Dow Jones Industrial Average fell 1.7% and lost nearly 4,000 points. The index is now down more than 10% from its most recent high, which is considered a correction in technical terms. Meanwhile, the tech-heavy Nasdaq also fell further into correction territory, closing down 2% and off 13% since a record close in October.
Oil prices have also seen a sharp increase, with U.S. crude topping $100 a barrel and global Brent crude reaching around $114 at around 4 p.m. ET. The yield on the 10-year Treasury note surged to 4.4%, the highest since last summer. Some energy stocks, such as Exxon, have traded near all-time highs.
Market Reactions to Trump’s Actions
Shortly after stock markets closed on Thursday, Trump announced he was pausing attacks on Iranian energy sites for 10 days. However, stocks barely reacted to this announcement. Just days earlier, they had risen sharply on Monday when the president stated that there had been “productive” talks with Iranian representatives, leading him to pause strikes on Iranian power facilities for five days.
Adam Turnquist, chief strategist at LPL Financial, noted that the market is looking beyond commentary from the administration. He emphasized that investors are seeking concrete details and a resolution, with actions speaking louder than words.
This new reality contrasts with Trump’s previous ability to move markets during his first term and the early stages of his second. Throughout 2025, Trump frequently changed his stance on tariff levels, causing traders to react. This pattern eventually led to the nickname “TACO” — for “Trump Always Chickens Out.” Last month, the Supreme Court struck down many of these tariffs.
Long-Term Implications of the Conflict
Experts believe that a return to pre-war conditions and market levels is unlikely in the short or medium term. The disruption to oil and gas flows has been substantial, leading to increased transport costs and higher prices per barrel. Even after the Strait of Hormuz, which Iran has used as a chokepoint, reopens, the cost of transiting through it is likely to remain elevated.
The broader economic fallout is already being felt, making interest rate cuts by the Federal Reserve less likely. Higher oil costs are contributing to already-sticky inflation, increasing the odds of a rate hike before the end of the year.
Steve Sosnick, chief strategist at Interactive Brokers, said that even if hostilities end tomorrow, the market will rally, but it won’t necessarily return to previous levels due to the disruptions that have occurred. Oil prices won’t immediately revert to their previous levels, and markets won’t price in rate cuts as they did before.
Economic Outlook and Investor Sentiment
A White House representative did not respond to a request for comment Friday. Earlier, the president expressed that he was not concerned about the market’s recent performance, stating that oil prices had not gone up as much as he expected and that they would eventually come back down.
Despite the current market downturn, Turnquist noted that the outlook for earnings growth remains bullish. However, this could change if the conflict continues and further impacts consumer spending and business investment.
Compared to prior oil shocks, the U.S. economy is less oil-intensive, having transitioned to a service-oriented model. Additionally, America’s oil production boom over the past decade has supported global oil markets, making it less likely for prices to rise as much.
However, stocks were already considered expensive before the hostilities. With stretched valuations, traders may find it challenging to return stock prices to their previous record levels.
Future Market Outlook
Matt Maley, chief market strategist at Miller Tabak, warned that the risk-reward is heavily weighted toward the risk of further stock-price declines. Should hostilities persist, Trump’s ability to influence markets will only continue to erode, according to Sosnick.
He added that Trump now realizes he would like to use rhetoric to ease the situation, but it’s not that easy anymore because the situation involves many moving parts and difficult variables. It doesn’t lend itself to a quick set of comments mollifying investors.
