U.S. stocks dropped and oil prices surged Friday after a U.S. airstrike killed a top Iranian general, reigniting geopolitical tensions in the Middle East.
Stocks fell broadly, but pared losses in afternoon trading. The Dow Jones industrial average slumped 170 points, after tumbling more than 300 points following the opening bell. The Standard & Poor’s 500 fell 0.4%, as shares of airline stocks slid on higher oil prices. The technology-heavy Nasdaq Composite lost 0.4%.
Stocks had closed at records Thursday following a stellar 2019 performance, which saw them notch their best year since 2013.
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Despite Friday's losses, analysts said investors' reaction to the attack was relatively muted. Iran could retaliate against the U.S. by temporarily disrupting oil supply in the Middle East, but it would likely be temporary, they said.
"Stocks are resilient right now," says Carter Henderson, portfolio specialist and director of institutional development at Fort Pitt Capital Group. “The U.S. has become more energy independent over the past decade and is less reliant on the Middle East. That's helping to ease investors' nerves."
The Pentagon launched an airstrike late Thursday that killed Gen. Qasem Soleimani, the head of Iran's elite Quds Force. He was an influential figure in Iranian politics, and his death raises fears about possible retaliation against the U.S.
The Defense Department said it conducted the attack as a "defensive action" against Soleimani, who it said was planning further attacks on American diplomats and service members.
Oil prices jumped on concerns that Iran might respond against the U.S. Brent crude, the global benchmark, climbed 3% to $68.22 a barrel. U.S. crude rose 2.5% to $62.72 per barrel.
During past flare-ups with the U.S., Iran threatened the supply of oil that travels from the Persian Gulf to the rest of the world. About 20% of oil traded worldwide goes through the Strait of Hormuz, where the shipping lane is only 2 miles wide and tankers have come under attack this year.
Investor sentiment has climbed in recent weeks because of optimism on trade with China, but geopolitical tensions in the Middle East could briefly put a dent in U.S. consumers' pocketbooks, according to Mike Bailey, director of research at FBB Capital Partners.
"This could be a short-term hit for pricing at the gas pump, which would be painful for consumers," Bailey says. "Travelers may see higher prices for airline tickets, but I expect it to be short-lived."
Airlines were among the biggest decliners in the Standard and Poor’s 500 as oil prices rose. American Airlines, United Airlines, American and Delta all shed at least 2.5%.
Heightened trade tensions, meanwhile, boosted shares of defense contractors. Northrop Grumman added 4.7% and Lockheed Martin climbed 4%.
Some energy stocks rose. Exploration companies Marathon Oil and Occidental Petroleum added 1% and 2.4%, respectively.
Safe-haven assets rallied, with gold rising 1.5% to $1,551.20 a troy ounce.
Bond yields fell. The yield on the benchmark 10-year U.S. Treasury note fell to 1.81%, from 1.88% Thursday.
Carlo Piovano of The Associated Press contributed to this report.
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Dow futures tumble nearly 300 points, oil prices surge after US airstrike - USA TODAY
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