Michael Gagliano works on the floor at the New York Stock Exchange on Friday.
Seth Wenig/AP
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Seth Wenig/AP
NEW YORK — Oil prices touched their highest levels since 2023 after surging again Friday because of the Iran war, while a weak update on the U.S. job market highlighted the economy’s precarious position. The two trends raised the risk of a worst-case scenario for financial markets, and stocks fell as they neared the finish of a punishing week.
The S&P 500 dropped 1.1% after a report showed U.S. employers cut more jobs last month than they created and after oil prices spiked above $90 per barrel. It’s a combination that investors hate because no one in the world has a good tool to fix both a weak economy and high inflation at the same time.
The Dow Jones Industrial Average was down 558 points, or 1.2%, as of 1:45 p.m. Eastern time, and the Nasdaq composite was 0.9% lower. Wall Street’s moves are still erratic, though, given all the uncertainties created by the war. The Dow dropped as many as 945 points in the morning before roughly halving its loss.
“You can’t sugarcoat this report,” according to Brian Jacobsen, chief economic strategist at Annex Wealth Management. “A negative payrolls number combined with a big jump in oil prices will have traders worrying about stagflation risks.”
Stagflation is what economists call a stagnating economy combined with high inflation, and a separate report released Friday added to the sour mix after showing that U.S. retailers made less money in January than economists expected. It raised the disconcerting possibility that spending by U.S. households, the main engine of the economy, may be stretched near its maximum.
Usually when the economy is unsteady and the job market is weakening, the Federal Reserve cuts interest rates to give things a boost. Lower rates can make it more affordable for households to get mortgages and companies to raise money to expand, while also helping prices for stocks and other investments. The Fed cut its main interest rate several times last year and had indicated more were to come this year.
To be sure, the U.S. stock market has a history of bouncing back relatively quickly following conflicts in the Middle East and elsewhere, as long as oil prices don’t jump too high for too long. Uncertainty about just how high oil prices will go this time around and how long they’ll stay there has caused frenetic swings across financial markets this week, sometimes hour by hour.
On Monday, for example, the S&P 500 tumbled to an immediate 1.2% loss at the start of trading but made it all back and ended the day with a tiny gain.
President Trump’s most recent signal on the war was that he wants an “unconditional surrender” of Iran, apparently ruling out negotiations.
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