Oil surged to its highest level since 2023 on Friday amid expanding conflict involving Iran, while a weak U.S. jobs report pushed U.S. stocks lower and capped Wall Street’s worst week since October.
The S&P 500 fell 1.3% after a payrolls report showed U.S. employers cut more jobs than they added last month. The Dow Jones Industrial Average plunged as much as 945 points intraday before closing down 453.19, or 0.9%. The Nasdaq composite dropped 1.6%.
“A negative payrolls number combined with a big jump in oil prices will have traders worrying about stagflation risks,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management. Stagflation — stagnant growth with high inflation — poses a difficult policy dilemma because the Federal Reserve has limited options to fix both at once.
Adding to concerns, a separate report showed U.S. retailers earned less in January than economists expected, raising questions about household spending, which is the main engine of the economy.
The Fed typically responds to a weakening economy by cutting interest rates to spur activity, as it did several times last year and had indicated more cuts might follow. But rate cuts can lift inflation, and surging oil is already pushing energy costs higher, complicating the Fed’s choices.
Brent crude jumped 8.5% to settle at $92.69 a barrel and briefly topped $94 — its highest since September 2023. U.S. benchmark crude rose 12.2% to $90.90, breaking $90 for the first time since 2023. Oil has climbed from near $70 late last week as the conflict widened to areas critical for oil production and shipping. Markets are watching the Strait of Hormuz, through which about a fifth of the world’s oil normally passes.
The U.S. government released details of a plan to offer insurance for ships transiting the strait, a move that had little calming effect on markets. Analysts warn that sustained oil at $100 a barrel or higher could strain the global economy.
History suggests stock markets can rebound after Middle East conflicts if oil doesn’t stay too high for long, but uncertainty over how high and for how long prices will rise produced volatile trading this week, with swings sometimes measured hour by hour. On Monday, the S&P briefly fell 1.2% at the open but recovered to finish slightly higher.
President Trump recently signaled he wants an “unconditional surrender” from Iran, apparently ruling out negotiations, a stance that could influence market sentiment.
In the Treasury market, yields wavered as higher oil pushed yields up while weak economic data pulled them down. The 10-year Treasury yield rose toward 4.19% before slipping back to about 4.14%, up from 4.13% late Thursday and 3.97% a week earlier.
Smaller companies, which are often more sensitive to borrowing costs and domestic demand, suffered the steepest losses. The Russell 2000 index of small-cap stocks fell 2.3%.
Fuel-intensive and travel-related firms were among the hardest hit. Old Dominion Freight Line dropped 7.9%, Carnival fell 5%, and Southwest Airlines declined 5.3%.
Overall market closes: the S&P 500 fell 90.69 points to 6,740.02; the Dow dropped 453.19 to 47,501.55; and the Nasdaq lost 361.31 to 22,387.68.
Globally, European indices slid, while Asian markets had mixed results. London’s FTSE 100 fell 1.2%, Hong Kong’s Hang Seng rose 1.7%, and South Korea’s Kospi was nearly unchanged after a dramatic midweek swing — plunging 12.1% Wednesday and rebounding 9.6% Thursday.
