Stocks closed lower on Friday and oil prices climbed after a military strike by Israel on Iran stirred investor fears about the risk of war breaking out in the Middle East.
The S&P 500 slid 68 points, or 1.1%, to end the day at 5,977, while the Dow Jones Industrial Average dropped 770 points, or 1.8%, to 42,198 points. The Nasdaq Composite shed 1.3%.
The market slide comes after Israel launched strikes on Iran’s nuclear sites and other targets early Friday, the start of what Israel said could be a days-long attack. Iran responded by launching over 100 drones, which Israel claimed it was able to mostly intercept.
The strikes come as President Trump seeks to rein in Iran’s nuclear capabilities. The U.S. and Iran are scheduled to meet Sunday in Oman, as part of a series on ongoing talks.
“The initial market response has been largely contained, but the risk of a broader military conflict certainly cannot be dismissed,” said Jeff Buchbinder, chief equity strategist at LPL Financial. “Iran has begun to retaliate and will continue to do so. This phase of the conflict will likely last several weeks at least.”
The oil market had an even stronger reaction on Friday, with U.S. benchmark crude oil increasing 7.3% to $72.98. Bent crude, the international standard, climbed 7% to $74.23 for a barrel. A deepening conflict could impact the flow of oil from Iran, a major producer of crude, according to analysts.
One concern is that Iran closes the Strait of Hormuz, a strategic channel through which millions of barrels of oil flow each day. For now, that option may be off the table for now, according to Kristian Kerr, head of macro strategy at LPL Financial.
“We think this is unlikely for now given Iran’s need to maintain oil sales to China,” Kerr said in an email.
Iranian crude exports are restricted by Western sanctions and import bans, with China the only recipient of the country’s oil. Israel exports only small amounts of oil and and other energy products.
The Middle East tensions also affect markets beyond oil, said Joy Yang, head of index product management at MarketVector Indexes, noting a decline in bitcoin prices and a rally in defense stocks, as airline stocks fall.
Airlines, whose fuel costs depend on global oil prices and whose revenues depend on travel sentiment, experienced sharp losses. United Airlines lost 4.4%, Delta Air Lines gave up 3.8% and Norwegian Cruise Line Holdings dropped 5%.
Boeing shares fell 1.7% Friday following a crash in India involving one of its 787-8 Dreamliner planes.
The Associated Press
contributed to this report.
Mary Cunningham is a reporter for CBS MoneyWatch. Before joining the business and finance vertical, she worked at “60 Minutes,” CBSNews.com and CBS News 24/7 as part of the CBS News Associate Program.
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