US markets end lower as West Asia crisis deepens; Crude oil spikes above $85 per barrel

The Dow Jones Industrial Average dropped nearly 800 points on Thursday at the close after the price of oil spiked to its highest level since the summer of 2024 because of the war with Iran.

The Dow sank 1,066 points, or 2.2%, and its steep losses accelerated through the day. The S&P 500, which is the measure of the US stock market that many more 401(k) accounts follow, recouped partial losses to close 0.5% lower, while the Nasdaq composite was down 0.2% at the time of closing on Thursday.

The sell-off came as worldwide financial markets again followed the cue of oil prices. Sharp increases are raising worries that a long-term spike could exhaust households' ability to spend, grind down the global economy and push interest rates higher.

The price for a barrel of benchmark US crude shot up 8.5% to settle at $81.01 per barrel. Brent crude, the international standard, climbed 4.9% to $85.41 per barrel and is also near its highest price since two summers ago.

The jumps came after Iran launched a new wave of attacks against Israel, American bases and countries around the region. The war's escalation is raising worries about how long disruptions will last in the region for the production and transport of oil and natural gas.

Prices at US gasoline pumps have already jumped because of them. The average price for a gallon is $3.25, up 9% from $2.98 a week ago, according to the auto club AAA.

Stocks of airlines fell to some of the US market's worst losses on Thursday. Higher oil prices are increasing their already big fuel bills, while the war has left hundreds of thousands of passengers stranded across the Middle East.

American Airlines lost 6.4%, United Airlines fell 6.6%, and Delta Air Lines sank 4.8%.

Stocks of smaller companies, meanwhile, took heavy hits. That's typical when worries are growing about the strength of the economy and about interest rates rising. The Russell 2000 index of the smallest stocks fell a market-leading 2.7%.

Wall Street's drop would have been worse if not for Broadcom. The chip company's stock rose 2.9% after it reported stronger profit and revenue for the latest quarter than analysts expected. It's one of Wall Street's most influential stocks because it's one of the biggest by total value, and CEO Hock Tan said it benefited from a 74% jump in revenue for AI chips.

In the bond market, Treasury yields climbed as rising oil prices put more upward pressure on inflation, which could keep the Federal Reserve from cutting interest rates.

The yield on the 10-year Treasury rose to 4.14% from 4.09% late Wednesday and from just 3.97% before the war with Iran started.

The Treasury Secretary on Thursday also announced a 30-day waiver to India for buying Russian oil to alleviate inflation worries.