Oil rises to its highest price since 2023, and stocks fall after US jobs report

NEW YORK – Oil shot to its highest price since 2023 after rising again Friday because of the Iran war, and a weak US job market sent stocks down to Wall Street’s worst week since October.

The S&P 500 fell 1.3% after a report showed US employers cut more jobs last month than they created and after oil prices rose above $90 a barrel. The combination of a weak economy and high inflation is a bad news for investors because the Federal Reserve does not have a good tool to solve both problems at the same time.

The Dow Jones Industrial Average sank nearly 945 points before ending with a loss of 453, or 0.9%, and the Nasdaq composite sank 1.6%.

“You can’t fill out this statement,” according to Brian Jacobsen, chief economist at Annex Wealth Management. “A negative payroll number combined with a big jump in oil prices will make investors worry about the risks of stagflation.”

Stagflation is what economists call the unfortunate combination of a stagnant economy and inflation, and a separate report released on Friday added to the gloom after showing that US retailers made less money in January than economists expected. It raised the alarming possibility that spending by US households, the main engine of the economy, could be stretched close to its peak.

Often when the economy is unstable and the job market slows, the Federal Reserve cuts interest rates to stimulate growth. Low prices can make it easier for households to get loans and for companies to raise money to expand, while also raising the prices of stocks and other investments. The Fed cut its key interest rate several times last year and had indicated more would come this year.

But low interest rates can also cause inflation to rise. And the Fed’s hands may be getting more tied because oil prices are pushing up inflation because of the disruption to the energy industry.

The price of a barrel of Brent crude, the international standard, jumped another 8.5% to settle at $95. It briefly rose above $94 to touch its highest level since September 2023.

A barrel of benchmark US crude broke the $90 level for the first time since 2023 and jumped 12.2% to $90.90.

Oil prices rose, with Brent rising from $70 at the end of last week, as the war escalated and included important areas in the production and movement of oil and gas in the Middle East. A lot depends on what happens through the Strait of Hormuz off the coast of Iran, where about a fifth of the world’s oil normally goes.

The US government gave evidence on Friday about the plan announced by the President, Mr. Trump, to provide insurance for ships crossing the river, but it did not work in the market.

If oil prices rise too high, like $100 a barrel, and stay there, some analysts and investors say it could be too much to stop the economy.

To be sure, the US stock market has a history of recovering quickly following tensions in the Middle East and elsewhere, as long as oil prices don’t jump too high for too long. Uncertainty about how high oil prices are this time around and for how long has caused volatility in financial markets last week, sometimes hourly.

On Monday, the S&P 500 fell to a quick loss of 1.2% in early trading but recovered all that to end the day with limited gains.

Trump’s latest vision of the war is that he wants “unconditional surrender” of Iran, apparently ruling out negotiations.

In the bond market, Treasury yields have been shaky, with high oil prices rising above them and disappointing updates on the US economy coming down.

The yield on the 10-year Treasury first rose to 4.19% before returning to 4.14%. That’s up from 4.13% at the end of Thursday and only 3.97% last week.

Small companies tend to feel the sting of high borrowing costs especially because many need to borrow to grow. Smaller companies are also more likely to depend on the strength of the US economy for their profits than larger multinational competitors, and smaller stocks on Wall Street took a sharp turn Friday.

The Russell 2000 index of small stocks fell a market-leading 2.3%.

Among the largest companies in the S&P 500, companies with higher fuel bills helped lower the trend. Old Dominion Freight Line sank 7.9%, Carnival cruises fell 5% and Southwest Airlines lost 5.3%.

All told, the S&P 500 fell 90.69 points to 6,740.02. The Dow Jones Industrial Average fell 453.19 to 47,501.55, and the Nasdaq composite sank 361.31 to 22,387.68.

In stock markets abroad, indices fell in Europe following a better finish in Asia. London’s FTSE 100 fell 1.2%, while Hong Kong’s Hang Seng jumped 1.7%.

South Korea’s Kospi was almost unchanged after falling 12.1% Wednesday for its worst loss in history and recovering 9.6% Thursday.