Major North American indexes were mixed on Friday as the month-long Middle East conflict dragged on, weighing on sentiment despite the United States pushing back another deadline to strike Iran’s energy infrastructure.
At 10:09 a.m. ET the Dow Jones Industrial Average fell 1.06%, the S&P 500 lost 0.94%, and the Nasdaq Composite shed 1.27%.
The Toronto Stock Exchange’s S&P/TSX composite index opened lower but soon turned around with the help of rallying gold and oil prices. In late morning trade, it was up 0.6%.
Oil prices rose, but were set for their first weekly decline since February 9 as U.S. President Donald Trump extended a pause in attacks on Iran’s energy plants, though investors remain cagey about prospects for ceasefire in the month-old war.
Brent crude futures rose by $2.85, or 2.64%, to $110.86 a barrel by 1322 GMT. U.S. West Texas Intermediate futures were up $2.53, or 2.68%, at $97.01.
The Brent benchmark has jumped 53% since February 27, the day before the U.S. and Israel launched strikes against Iran, but was down 1.2% this week. WTI, up 45% since the war began, was down 1.3% over the week.
“Despite talks of de-escalation, oil is trading on war longevity, not just headlines. Any direct damage to oil infrastructure or prolonged conflict could force markets to rapidly reprice higher,” said Priyanka Sachdeva, analyst at Phillip Nova.
While Trump extended his deadline for Iran to reopen the Strait of Hormuz or face the destruction of its energy infrastructure, the U.S. has also sent thousands of troops to the Middle East, with Trump weighing whether to use ground forces to seize Iran’s strategic oil hub of Kharg Island.
The U.S. can only determine with certainty that it has destroyed about a third of Iran’s vast missile arsenal, five people familiar with the U.S. intelligence told Reuters.
An Iranian official told Reuters that a 15-point U.S. proposal, conveyed to Tehran by Pakistan, was “one-sided and unfair.”
“More talk of a deferral of U.S. strikes on the Iranian grid seems to have faded quickly, with the market all too aware of the build-up of U.S. miliary power, Iranian intransigence and the tendency towards a flurry of events over the weekend when markets are closed,” said Sparta Commodities analyst Neil Crosby.
The conflict has taken about 11 million barrels per day out of global oil supply, with the International Energy Agency describing the crisis as worse than the two 1970s oil shocks combined.
“Every day flows through the Strait remain restricted, more than 10 million barrels of oil are missing … tightening the oil market further,” said UBS analyst Giovanni Staunovo.
Analysts at Macquarie Group said that oil prices will fall quickly if the war begins to wind down soon but still remain above pre-conflict levels. However, prices could rise to $200 if the war drags on until the end of June, they added.
The S&P 500 and the Nasdaq stayed on track for their fifth week of losses. The Dow was set to end the week little changed.
The CBOE Volatility Index, considered Wall Street’s fear gauge, was up 2.56 points at 30.
At 10:09 a.m. ET the Dow Jones Industrial Average fell 1.06%, the S&P 500 lost 0.94%, and the Nasdaq Composite shed 1.27%.
The S&P 500 communication services index remained under pressure and was down 0.9% as Alphabet and Meta posted declines of 1.2% and 1.7%, respectively.
Software stocks were also hit, with the iShares Expanded Tech-Software sector ETF falling 3.4% to a more than one-month low.
Consumer discretionary stocks lost 1.4%. Cruise-operator Carnival Corp was down 1.3% after cutting its annual adjusted profit forecast.
Oil prices were up nearly 3%, weighing on airline stocks, with American Airlines and United Airlines down 1.2% each.
On Thursday, the Nasdaq ended more than 10% lower from its record close, confirming it had been in correction territory. The Russell 2000, the first on the correction path, confirmed it last Friday.
“The speed of the market’s declines in recent weeks and the fact that most of this fear has been driven by a single narrative, geopolitical tensions, suggests that the market is in the midst of a correction, and not a bear market,” said Glen Smith, chief investment officer, GDS Wealth Management.
The spike in oil prices as a result of the Iran war has brought inflation fears to the forefront, complicating the future rate-cut path for central banks.
Money market participants are not pricing in any easing from the U.S. Federal Reserve this year, compared with two cuts anticipated before the conflict broke out, according to CME’s FedWatch Group. Expectations of a rate hike in December were last at 49%.
University of Michigan consumer sentiment data released on Friday showed consumer sentiment was at 53.3 versus a preliminary reading of 55.5.
Investors will look for commentary from regional Fed Presidents Thomas Barkin, Mary Daly and Anna Paulson later in the day.
In individual movers, Unity Software’s shares jumped 11.7% after the maker of videogame software reported first-quarter preliminary revenue above analysts’ estimates.
Reuters, Globe staff
