Dow Plunges 785 Points on Oil Spike

The market turmoil follows a dramatic escalation in the Middle East, beginning with U.S. and Israeli military strikes on Iran on February 28. Iran retaliated with missile and drone attacks on U.S. military bases and targets in neighboring Gulf states, including the UAE and Saudi Arabia. These actions have led to a near-total shutdown of the Strait of Hormuz, a critical chokepoint for global energy. Roughly 20% of the world's total oil supply and a similar amount of liquefied natural gas (LNG) normally pass through the waterway, but tanker traffic has effectively ceased after insurers withdrew coverage. The disruption extends beyond oil tankers, with major container ports like Jebel Ali in Dubai suspending operations due to drone strikes. Carriers have declared force majeure, offloading containers at the nearest feasible ports and imposing war risk surcharges of $2,000-$3,000 per container for shipments in the region. West Texas Intermediate crude futures surged to $86 per barrel Friday, marking the biggest weekly jump since 2022. The Cboe Volatility Index (VIX), Wall Street's "fear gauge," shot up nearly 22% to its highest level since November, signaling rising investor anxiety. The energy shock is stoking fears of a new wave of inflation. This complicates the outlook for interest rate cuts by the Federal Reserve, as policymakers may be forced to keep rates higher for longer to counter rising prices. Analysts now warn that a protracted conflict could push oil prices past $100 a barrel. In a scenario where Gulf countries' oil storage is exhausted, some forecasts suggest crude could surge to $120 per barrel. The impact is already being felt by consumers. The average national price for a gallon of gasoline in the U.S. has jumped by 26.5 cents over the past week.