US Stocks Trim Early Declines Following Report on Strait of Hormuz Security Measures
US Stocks Pared Losses After Iran Report
US stocks reversed earlier losses on Thursday after a report emerged that Iran is drafting a protocol with Oman to monitor traffic through the Strait of Hormuz, a key corridor for oil transport. The S&P 500 Index fell 0.1% at 11:22 a.m. in New York, having dropped as much as 1.5% earlier in the day. The Nasdaq 100 Index was down 0.3% after falling 2.1%. Brent crude oil prices rose to around $107 per barrel, while the Cboe Volatility Index hovered around 25, stabilizing from earlier in the session.
According to state-run IRNA, citing Iran's deputy foreign minister, the protocol aims to facilitate safe passage through the Strait of Hormuz. This development contributed to a rapid and broad-based recovery in equities, which some market strategists attribute to buying from oversold conditions.
The recovery in US stocks halted at the Thursday open after President Donald Trump's hardline speech late Wednesday night undermined hopes for an early reopening in the Strait of Hormuz and a resolution of the conflict in the Middle East. Trump vowed that there would be more military attacks in coming weeks and did not commit to reopening the Strait of Hormuz, advising oil-importing countries to purchase crude from the US instead.
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| Sector | Thursday's Change | Weekly Change |
|---|---|---|
| Energy | 0.2% | 2.5% |
| Travel | -1.1% | -2.3% |
| Mining | -1.4% | -1.9% |
| Semiconductor | -1.3% | -2.1% |
| Metals | -1.2% | -1.8% |
| Finished Goods | -1.5% | -2.5% |
The S&P 500 has followed a pattern of selling off starting on Thursday after starting the week on a stronger note since the war began. The benchmark index was on the brink of correction territory on Monday before bouncing back strongly on Tuesday and Wednesday on reports that the US and Iran want to end the conflict soon. The S&P 500 is on course for its first weekly gain after notching the longest streak of losses in years.
Investors were likely to sell equities heading into the long weekend due to uncertainty surrounding oil prices and events in the Middle East. "You don't really know which way oil is going to go, which way events will go during the weekend," said Jeffrey Young, PGIM's head of investment strategy for quantitative solutions. The US stock market is closed on Friday for a holiday.
On the data front, initial jobless claims fell to one of the lowest levels in the last two years. The US trade deficit widened in February by less than forecast as both imports and exports increased.
Investor Takeaway
US stocks pared earlier losses following a report on Strait of Hormuz security measures.
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