Oil prices surged past $110 a barrel Thursday after U.S. President Donald Trump warned of further military action against Iran, dashing investor hopes for a swift resolution to the conflict.
In a primetime speech Wednesday, Trump declared that continued strikes could set Iran “back to the Stone Age” but provided no roadmap for reopening the Strait of Hormuz, a vital energy transit route.
Deutsche Bank’s Jim Reid noted the lack of clarity on timelines for ending hostilities. “There was no signal of the U.S. seeking an imminent off-ramp out of the war,” he said.
U.S. equities initially slid before recovering, closing narrowly positive. European markets ended mixed-London rose slightly while Paris and Frankfurt edged lower.
Investors had been hopeful for signs of de-escalation, which recent data suggested might be forthcoming. Instead, Trump's remarks fueled uncertainty.
“The equity market seems more convinced we’re closer to a resolution than the oil market,” said Art Hogan of B. Riley Wealth Management.
Analysts also pointed to growing skepticism over the reliability of Trump’s public statements. “At some point, markets start to question the veracity of his claims,” said Dave Grecsek of Aspiriant Wealth Management.
BP and Shell shares climbed nearly 3%, helping lift London’s benchmark index by 0.6%. Meanwhile, Tokyo’s Nikkei fell over 2% and Hong Kong and Shanghai markets also declined.
World Bank Managing Director Paschal Donohoe expressed concern about broader economic consequences. “We are extremely worried about inflation, job losses, and food insecurity,” he stated.