Stocks sink as oil prices rise and Middle East conflict deepens

2026-03-12 14:35:56

U.S. stocks fell sharply Thursday morning, with the Dow Jones Industrial Average down more than 500 points shortly after markets opened, and the S&P 500 and the Nasdaq $NDAQ -0.59% each off about 0.7%.

The culprit? Oil prices, rising as the U.S. war against Iran intensifies and appears set to defy the White House’s prediction of a quick and tidy conflict.

Oil news sees stocks sink

The International Energy Agency’s monthly report, released Thursday, described the ongoing crisis in the Strait of Hormuz as “the largest supply disruption in the history of the global oil market.” Crude and oil product flows through the Strait have fallen from about 20 million barrels a day before the U.S. attacked Iran to nearly zero at present, as Iranian drones attack ships un-allied with Iranian interests, and sources confirm that Iran has laid mines throughout the Strait.

Experts outside the IEA agree that the situation is unprecedented. As JPMorgan $JPM 0.00% Chase analyst Natasha Kaneva told The Wall Street Journal earlier this week: “In the whole written history of the strait, it has never been closed, ever. To me, it was not just the worst-case scenario. It was an unthinkable scenario.”

“We are looking at what is by far the biggest disruption in world history in terms of daily oil production,” author and historian Daniel Yergin further told The Journal. “If it goes on for weeks, it will reverberate across the global economy.”

As of Thursday morning, producers across the Gulf—from Iraq to Saudi Arabia, the UAE, Kuwait, and Qatar—have collectively cut at least 10 million barrels a day of output. Brent remains around $100 a barrel.

The elevated Brent price comes even after Wednesday’s release of 400 million barrels from IEA member emergency reserves—the largest such release on record.

Inflation set to rise, too?

Wednesday’s CPI report offered a picture of relative calm — but possibly the last one for a while. Inflation held steady in February, with the Consumer Price Index rising 0.3% on the month and 2.4% year over year. Shelter remained the stickiest component. Eggs fell 42.1% annually, though that’s more about a correction in historically elevated prices.

The BLS numbers portray the world before it changed, analysts agreed. “This week’s CPI print is likely to be the last one showing somewhat stable prices,” said Liz Pancotti, Managing Director of Policy & Advocacy at Groundwork Collaborative. Tariffs and the Iran oil shock hadn’t yet hit the data, but they soon will.

Tomorrow brings the PCE index—widely known as the Fed’s preferred inflation gauge — and it will also serve as a pre-shock baseline, one that Chair Jerome Powell and the central bank will likely have to set aside. Prediction markets didn’t expect the Fed to cut rates before the U.S. attack on Iran, and it’s even less likely to do so now, with the conflict ongoing, oil prices rocketing, and the length of the crisis yet to be known.

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