U.S. equity markets managed to post modest gains on Thursday, recovering from an early selloff triggered by a sharp spike in crude oil prices. The S&P 500 rose 0.1%, while the Nasdaq Composite added 0.2%. The Dow Jones Industrial Average closed down 61 points. This resilience came despite significant pressure from the energy complex, as geopolitical tensions rattled global supply chains.
The primary catalyst was a renewed escalation in Middle East hostilities. Following statements from the U.S. administration vowing intensified actions against Iran, oil markets reacted violently. U.S. West Texas Intermediate crude surged to settle at $111.54 per barrel, marking its largest single-day percentage gain since 2020. The global benchmark, Brent crude, finished at $109.03.
The market's anxiety centers on the Strait of Hormuz, a critical maritime chokepoint that facilitates roughly one-fifth of the world's seaborne oil trade. The waterway remains closed, creating immediate supply shortages. This was evidenced by the oil futures curve moving into extreme backwardation, where near-term contracts trade at a significant premium to later-dated ones. At one point, the May WTI contract traded at a record $16.70 premium to the June contract, indicating a frantic scramble for prompt physical barrels.
The pain from higher energy costs was felt unevenly across sectors. Shares of companies sensitive to fuel expenses sold off sharply. United Airlines (UAL) fell 3%, and cruise operator Carnival (CCL) declined 3.5%. Tesla (TSLA) dropped 5.4% after reporting quarterly vehicle deliveries that missed analyst expectations, compounding its losses.
For consumers, the impact is already being felt at the pump. The national average price for a gallon of gasoline crossed the $4 threshold this week for the first time since 2022. Analysts warn that without a resolution to reopen the Strait of Hormuz, prices could climb to between $4.25 and $4.45 per gallon next week and potentially exceed $5 within a month. The price of diesel, which directly influences freight and goods costs, is on track to break its 2022 record within two weeks.
With the immediate geopolitical rhetoric subsiding, investor focus is pivoting decisively from headlines to hard data. The next major test will be the U.S. Consumer Price Index report for March, scheduled for release on April 10. Economists polled by Reuters anticipate headline CPI to rise 0.9% month-over-month, while the core measure, which excludes volatile food and energy components, is expected to increase 0.3%. Analysts note that the first direct pass-through of the recent oil spike will likely appear in motor fuel costs.
The outlook remains highly uncertain. J.P. Morgan analysts warned that oil could climb to $120-$130 per barrel in the near term and potentially rise above $150 if flows through the Strait of Hormuz remain disrupted into mid-May. Such a path, the bank cautioned, could severely dent economic demand and elevate recession risks. Dallas Federal Reserve President Lorie Logan acknowledged that a swift end to the conflict could moderate the economic impact but emphasized the prevailing uncertainty.
As U.S. and most European markets were closed Friday for the Good Friday holiday, the immediate market narrative was left to oil, futures, and Asian trading. Japan's Nikkei 225 rose 1.3%, and South Korea's Kospi gained 2.7%. Meanwhile, S&P 500 futures slipped about 0.3%, a signal that while investors are willing to buy short-term dips, they are not yet convinced the oil shock has passed.
