NEW YORK (AP) — A sell-off for stocks is slamming Wall Street after careening from Europe and Asia, and oil prices are leaping even higher as rise that the war with Iran is widening and may do more sustained damage to the economy than feared. The S&P 500 dropped 1.6% in early trading on Tuesday. The Dow Jones Industrial Average sank 880 points, or 1.8%, and the Nasdaq composite lost 1.8%. Crude oil prices jumped more than 8% as Iran struck the U.S. Embassy in Saudi Arabia, part of a widening of targets that’s also including areas critical to the world’s oil and natural gas production. Treasury yields rose.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — Global markets slumped and oil prices soared to levels not seen in more than a year as Iran launched a series of retaliatory attacks, including a drone strike on the U.S. Embassy in Saudi Arabia.
U.S. futures are down sharply Tuesday with the S&P 500 and the Dow Jones Industrial Average falling 1.7%.
Benchmark U.S. crude jumped 8.6% to $77.36 a barrel. Gas prices were already rising before the U.S. struck Iran as refiners switch over to summer blends of fuel.
The average price for a gallon of gasoline in the U.S. jumped 11 cents overnight to about $3.11, according to data from motor club AAA.
Brent crude, the international standard, added 6.7% to $81.29 a barrel. Global oil prices jumped to start the week over concerns that the war will clog the global flow of crude.
Stocks of airlines, including American Airlines, United and Delta have continued to slide, falling between 2% to 3% before Tuesday’s market open. Higher oil prices threatens to send ticket prices higher and fighting in the Middle East already has closed airports and left travelers stranded.
Shares of Amazon declined 2% in premarket trading Tuesday as the online giant said Monday that two of its data centers in United Arab Emirates were hit by drones, while a drone strike near one of its facilities in Bahrain “caused physical impacts to our infrastructure.”
In early European trading, France’s CAC 40 dropped 2.9% to 8,151.12, while in Germany the DAX sank 3.7% to 23,738.90. Britain’s FTSE 100 declined 2.6% to 10,496.32.
In South Korea, a big energy importer, the Kospi plunged 7.2% as markets reopened after a holiday on Monday, closing at 5,791.91.
Japan’s benchmark Nikkei 225 sank 3.1% to finish at 56,279.05. Like other resource-poor countries in the region, Japan could be especially hit by the lack of access to the Strait of Hormuz, since much of its oil and natural gas imports are shipped through there.
Analysts say Japan has a sizable stockpile lasting more than 200 days, and so the threat isn’t immediate.
Japanese energy stocks plunged, with Eneos Corp. down 3.4% and Idemitsu Kosan down 3.1%. Defense-related issues, which have risen recently on expectations of more military spending by Prime Minister Sanae Takaichi, sank back as traders sold to lock in gains from the day before. Mitsubishi Heavy plunged 5.3%, and IHI lost 4.9%.
In the rest of the region, Australia’s S&P/ASX 200 lost 1.3% to 9,077.30, while Hong Kong’s Hang Seng shed 1.1% to 25,768.08. The Shanghai Composite index lost 1.4% to 4,122.68.
The losses cascaded in Asia, with ANA stock down 3.3%, while Japan Airlines fell 6.4%. Korean Air declined 10.3% and Qantas Airways lost 1.8%.
Despite global markets in retreat, the reactions to the war have been moderated by the fact that past military conflicts in the Middle East haven’t caused long-term declines. For this war to knock down U.S. stocks in a significant and sustained way, the price of oil would perhaps need to jump above $100 per barrel, according to strategists at Morgan Stanley led by Michael Wilson.
“Since 2000, there have been 22 one-day oil price spikes of more than 10%,” said Stephen Innes, managing partner at SPI Asset Management. “In other words, energy shocks do not automatically derail equities unless they are severe and sustained. The market is well aware of that playbook.”
On Monday, the S&P 500 fell as much as 1.2% but finished with a gain of less than 0.1%. The Dow Jones Industrial Average dipped 0.1% and the Nasdaq composite rose 0.4%. Both also recovered from steep early losses.
In currency trading early Tuesday, the U.S. dollar edged up to 157.58 Japanese yen from 157.47 yen. The euro cost $1.1608, down from $1.1692.
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