Stocks tumble as oil surges toward record highs, gas prices spike across America and fears grow of a 1970s energy crisis
Stocks fell sharply Monday morning as oil prices surged above $100 a barrel after Middle Eastern producers began cutting output amid the escalating war with Iran.
The Dow Jones dropped 839 points or 1.77 percent after 10am in New York, while the S&P 500 and Nasdaq also slid around 1 percent as investors on Wall Street reacted to soaring energy prices.
Oil briefly surged above $110 overnight and at one point topped $119, its highest level in about four years - since the global energy shock triggered by Russia's invasion of Ukraine in 2022.
Experts warn the conflict could trigger the biggest shock to energy markets since the 1970s oil crisis, when an Arab oil embargo sent fuel prices soaring and economies into recession.
The surge followed the largest weekly gain ever recorded for US crude, with prices jumping more than $40 a barrel in little more than a week. The record price for US oil - $145 a barrel reached in 2008 - is also coming back into view.
In fact, Qatar's energy minister Saad al-Kaabi warned prices could reach $150 a barrel if tankers remain unable to pass through the Strait of Hormuz.
The spike is already hitting Americans in their wallets.
The national average price of gasoline climbed to $3.47 a gallon today, according to AAA - up about 16 percent in just a week since the conflict began.
Wall Street fell sharply Monday morning, with the Dow Jones dropping 634 points or 1.34 percent as oil prices surged above $100 a barrel after Middle Eastern producers began cutting output amid the escalating war with Iran
Gas prices across the United States surged to a national average of $3.47 per gallon, with California feeling the strain as prices climbed. At a Chevron station in downtown Los Angeles, prices were among the highest seen this week
High-cost states such as Washington, Hawaii, and Oregon are seeing gas prices exceed $4 per gallon.
California, which has the highest average in the country is averaging $5.20 per gallon, according to AAA.
At a Chevron station in Los Angeles, drivers were facing prices as high as $8.21 for a gallon of regular gas.
Cities such as Baltimore, Maryland, have seen their gas prices jump 55.5 cents in just a week at $3.49 a gallon, according to GasBuddy.
New York is hovering just below the national average, with prices at $3.40 per gallon - up 40 cents from $3.01 just a week ago. White Plains currently has some of the highest prices in the state at $3.48 per gallon.
Oil's surge comes as the war has effectively closed the Strait of Hormuz, the narrow shipping route controlled by Iran through which roughly one-fifth of the world's oil normally flows each day.
'In the whole written history of the strait, it has never been closed, ever,' JPMorgan Chase analyst Natasha Kaneva told the Wall Street Journal. 'To me, it was not just the worst-case scenario. It was an unthinkable scenario.'
With tankers unwilling to risk sailing through the waterway amid threats of Iranian attacks, oil producers across the region are now being forced to cut production.
A trader works on the floor of the New York Stock Exchange following the opening bell on Thursday in New York City. Stocks have fallen as markets react to volatile oil prices sparked by the escalating Middle East conflict - and are set to fall more next week
Fire breaks out at the Shahran oil depot after US and Israeli attacks, leaving numerous fuel tankers and vehicles in the area unusable in Tehran, Iran, on Sunday
Kuwait - the fifth-largest producer in the Organization of the Petroleum Exporting Countries (OPEC) - announced precautionary cuts to its output because of what it called threats to ships passing through the Strait.
In Iraq, production from the country's three main southern oilfields has reportedly collapsed by around 70 percent, dropping to about 1.3 million barrels a day from more than 4 million barrels before the war.
The United Arab Emirates has also said it is carefully managing offshore production as storage tanks begin filling up because oil cannot be shipped out.
The dramatic disruption has sparked urgent talks among major economies.
Finance ministers from the Group of Seven nations - including the United States, Britain, Germany, France, Italy, Canada and Japan - were expected to hold an emergency call Monday morning to discuss whether to release oil from strategic reserves to stabilize markets.
The move would mirror similar emergency actions taken during the energy crisis that followed Russia's invasion of Ukraine.
Analysts say the situation in global energy markets is unlike anything seen before.
Neil Atkinson, a former head of oil markets at the International Energy Agency, warned the effective closure of the Strait of Hormuz could create an 'unprecedented energy crisis.'
'There is no precedent for this,' he said Monday. 'If the Strait remains closed and production stays shut in across the region, we are entering a crisis the likes of which we have never seen before.'
