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CNN
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The price of oil surged Friday in one of the market’s largest single-day increases in years, reflecting fears that a wider conflict in the Middle East could lead to serious energy supply disruptions.
Brent crude, the global benchmark, was up 5.9%, at nearly $71 a barrel. US oil jumped 8.6% to nearly $74 a barrel, after gaining as much as 13% earlier in the day. Those are the biggest intraday gains for each benchmark since March 2022, a month after Russia launched its full-scale invasion of Ukraine.
The surge illustrates “both immediate supply concerns and a growing sense that negative headlines could extend the timeline for escalation unlike the prior Israel-Iran episode,” Ahmad Assiri, research strategist at Pepperstone, a financial services firm, wrote in a research note.
Meanwhile, US stocks fell, sending investors retreating to traditional safe haven investments like gold, which rose about 1.7% to $3,444 per troy ounce. The US dollar broadly strengthened.
The Dow fell 665 points, or 1.55%. The broader S&P 500 dropped 1% and the Nasdaq Composite slid 1.15%.
Wall Street’s fear gauge, the CBOE Volatility Index, surged 12%.
Shares in airlines and travel companies fell on Friday amid the turmoil in the Middle East.
United Airlines (UAL) was lower by 4.4%, Delta Air Lines (DAL) fell 4% and American Airlines (AAL) dropped by 4.8%. Shares in European airlines tumbled, too: Easyjet, British Airways parent IAG and Lufthansa all fell more than 3.5%.
Expedia Group (EXPE), a travel company, fell 2.8%. Shares in cruise ships dropped. Royal Caribbean (RCL) fell 3.1%, Norwegian (NCLH) fell 4.3% and Carnival (CCL) dropped 5.4%.
Meanwhile, defense contractors jumped higher. Lockheed Martin (LMT) gained 2.7% and and General Dynamics (GD) rose 1.4%.
Early on Friday, Israel launched an unprecedented attack against Iran’s nuclear and missile facilities, killing at least two of Iran’s top military commanders. Israeli Prime Minister Benjamin Netanyahu said in a televised address that the “targeted military operation” is expected to continue for “many days.”
“This operation will continue for as many days as it takes to remove this threat,” Netanyahu said.
A state of emergency has been declared in Israel in anticipation of an Iranian retaliation, which appears to have begun. Iran’s Supreme Leader Ayatollah Ali Khamenei said Israel will face “severe punishment” for the attacks.
Secretary of State Marco Rubio said the US was not involved in the Israeli operation and warned Iran against targeting US interests or personnel.
Investors are concerned about how a retaliation by Iran may play out, whether the US may be targeted and whether a critical oil transport route may be disrupted.
If the conflict eliminates Iranian oil from the market, oil prices could spike by about $7.50 a barrel, according to Andy Lipow, president of Lipow Oil Associates, a consulting firm.
“Iran knows full well that [President Donald] Trump is focused on lower energy prices and actions by Iran that impact Middle East supply and consequently raise oil prices damage Trump politically,” he said.
The bigger fear now is an even broader conflict that impacts the flow of oil from the Strait of Hormuz, the most critical chokepoint for oil supplies on the planet.
“Should oil exports through the Strait of Hormuz be affected, we could see $100 oil,” Lipow said.
OPEC on Friday pushed back on suggestions that surging oil prices after Israel’s attack on Iran could require the release of emergency oil stockpiles.
OPEC’s secretary general said in a statement on X that there are “currently no developments in supply or market dynamics that warrant unnecessary measures.”
Bob McNally, president of Rapidan Energy Group, told CNN that the OPEC statement is “consistent with their posture, which is to hunker down, lay low and hope this blows over.”
A rise in global oil prices could also reignite inflation, complicating the outlook for policymakers like the Federal Reserve.
“Any rise in energy inflation would be another reason for central banks to proceed cautiously with cutting interest rates, and for the Fed to remain on the sidelines for now,” analysts at Capital Economics said in a Friday note. Fed policymakers are set to meet next week to discuss the economic outlook and interest rates.
McNally at Rapidan Energy Group also told CNN the oil market had been “complacent about the risk of geopolitical disruptions” from the region.
“With Israel having commenced attacks against Iran, we expect significantly more risk premium to come into the price of crude in the coming days,” he said.
Iran’s preparation for a military response “raises the risk of not just disruptions but of contagion in other neighboring oil producing nations too,” Priyanka Sachdeva, senior market analyst at Phillip Nova, told Reuters.
“Although Trump has shown reluctance to participate, US involvement could further raise concerns,” she said.
This is a developing story and will be updated.
