What Iran Did To Cause The Dow To Fall Almost 800 Points
US stocks fell the most for the day, with the blue-chip Dow index closing nearly 800 points, as oil prices rose above $80 a barrel to their highest level in more than a year after Iran said it hit an oil tanker with a missile off the coast of Iraq.
The missile strike highlights the wider dangers to shipping in the Persian Gulf, beyond the Strait of Hormuz. Iran has previously said it has closed the Strait of Hormuz, through which a fifth of the world’s oil and natural gas flows. Although President Donald Trump has designated US Navy ships as escorts in the waters, the ship’s obstacles are stationary oil and container ships. Supply-limiting blockades and widespread attacks in many countries in the region have pushed oil prices to their highest level since January 2025.
Many analysts and economists are not yet worried that the recent increase in oil prices will significantly increase the rate of inflation or bring the economy to a standstill, but they agree that the longer this disruption continues, the more likely it is that inflation will increase.
“The situation is very uncertain but, if WTI (West Texas oil) stays close to $80 for a few months before it retreats during the whole year, then the maximum direct impact,” on inflation would be only 0.3%, said Stephen Brown, deputy chief economist for North America at the research firm Capital Economics.
The blue-chip Dow closed up 1.61%, or 784.67 points, to 47,954.74, while the broader S&P 500 fell 0.56%, or 38.79 points, to 6,830.71. The tech-heavy Nasdaq fell 0.26%, or 58.498 points, to 22,748.986. Meanwhile, West Texas Intermediate crude jumped 6.64% to $79.62 a barrel.
Markets are trading higher than oil prices
Aside from oil prices, some economists are concerned about a tight economy keeping inflation high.
“The most important issue against the Fed is that higher oil prices have come at a time when other indicators of pipeline inflationary pressures are also rising,” Brown said.
Prices and the development of AI are also putting upward pressure on the prices of IT equipment manufacturers, the latest memory chips, he noted. Higher memory chip prices will increase consumer prices for IT equipment and mobile phones this year, he said.
All of these factors could prompt the Federal Reserve to lower interest rates this year, Brown said.
The CME Fed Watch tool, which uses market data to estimate the likelihood the Fed will take rate moves, shows a 2.7% chance of a rate cut this month, down from 11% in April and nearly 30% in June. All of those odds of a rate cut are lower than they were last month.
The average 10-year Treasury yield rose four days in a row amid all these inflation fears. It last rose to 4.131%.
(updated with new information.)
Medora Lee is a money, markets, and personal finance reporter for USA TODAY. You can find him at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
This article originally appeared in USA TODAY: What Iran did caused the Dow to plunge nearly 800 points.
Reported by Medora Lee, USA TODAY / USA TODAY
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