U.S. Markets Tumble as Iran Closes Strait of Hormuz, Oil Prices Surge

U.S. stock markets took a significant hit Thursday after Iran's new leader, Mojtaba Khamenei, declared that the Strait of Hormuz would remain closed, sending oil prices soaring and reigniting fears of an inflationary spiral. The development rattled investors across Wall Street, triggering a broad selloff in equities.

The S&P 500 declined 1.5% to close at 6,672.77, while the Nasdaq Composite dropped 1.8% to 22,311.98. The Dow Jones Industrial Average fell 1.6%, settling at 46,677.85. Year-to-date, the S&P 500 is now down 2.5%, the Nasdaq has lost 4%, and the Dow has shed nearly 3%.

The Strait of Hormuz, a vital global shipping corridor responsible for roughly one-fifth of the world's oil and liquefied natural gas supply, has been effectively shut down following a joint U.S.-Israeli military campaign against Iran. Merchant vessels have faced repeated strikes in the region, prompting shipping companies to halt sailings amid crew safety concerns and insurance difficulties. Iraq and Oman subsequently moved to close their oil terminals, compounding supply fears.

The International Energy Agency called the disruption the largest oil supply shock in the history of global energy markets and announced its biggest-ever release of strategic reserves. Despite this, Brent crude surged over 10% to around $101 per barrel, after earlier touching nearly $120.

Strategists warned that prolonged conflict could keep markets under pressure. Keith Lerner of Truist noted that rising uncertainty is pushing investors away from riskier assets, and that the current correction may not yet have reached a durable bottom.

On the economic front, weekly jobless claims came in at 212,000, slightly below expectations, pointing to a still-resilient labor market despite broader geopolitical headwinds.

Investors also kept a close eye on Adobe's earnings report, as concerns continue to mount over artificial intelligence disrupting traditional software business models.