Oil spikes and stocks tumble after Trump's fiery speech fans fears of a prolonged war

• Oil surged and US stocks sunk after president Trump struck a combative tone in his latest speech about Iran.
• Traders worry that further military escalation will wreak havoc on global energy flows.
• Crude prices have soared more than 75% this year.

The oil and stock markets were upended on Thursday after President Donald Trump's fiery speech reignited fears of a prolonged war with Iran.

Oil prices soared as traders weighed the potential for continued supply disruptions, despite earlier expectations that the president would signal that the war was winding down in his primetime address.

Brent crude, the international benchmark, rose more than 8% to trade around $109 a barrel, up 81% for the year. May contracts for West Texas Intermediate crude jumped more than 10% to trade at around $110 a barrel, up 92% since January.

European diesel futures rose 10% to around $1,500 a ton, or more than $200 a barrel, their highest level since 2002. European natural gas futures gained around 3%.

All three benchmark indexes tumbled lower in the early morning, reversing some of their gains from Wednesday as investors grew more hopeful about an end to the Iran war. The Dow dropped as much as 700 points, while the tech-heavy Nasdaq 100 tumbled as much as 2%.

Here's where US indexes stood shortly after the 9:30 a.m. opening bell on Thursday:

• S&P 500: 6,489.55, down 1.3%
• Dow Jones Industrial Average: 45,967.19, down 1.3% (599 points)
• Nasdaq composite: 21,472.38, down 1.7%

Treasury yields, meanwhile, moved higher as investors continued to brace for hotter inflation. The benchmark 10-year US Treasury yield ticked up 3 basis points to 4.35%.

The conflict between Iran and the US and Israel has sent shockwaves through markets in recent weeks because it has effectively closed the Strait of Hormuz, through which about 20% of the world's oil and liquefied natural gas (LNG) flows. The conflict has also damaged energy infrastructure and forced production facilities, further choking supply and pushing prices even higher.

The fear percolating through markets is that higher oil prices will stoke price growth, burdening US consumers at a time when growth was already slowing. The hope was that Trump would provide an off-ramp to those worries and suggest that the hostilities were ending soon.

The president instead said the US was "on track to complete all of America's military objectives," but added that "we are going to hit them extremely hard over the next two to three weeks."

"We don't have to be there. We don't need their oil. We don't need anything they have, but we're there to help our allies," Trump said.

"We're going to bring them back to the Stone Ages where they belong," he added.

'Much more hawkish' than expected

Trump's comments were "much more hawkish" than what markets had been expecting over the past two days, wrote Dan Pickering, the chief investment officer at Pickering Energy Partners, on X.

"Markets returned to previous settings last night," John Canavan, a lead analyst at Oxford Economics, wrote in a note. "Without a clear path to the end of the war, the improvement seen in markets over the past few sessions was quickly reversed."

Technical strategists at Piper Sandler suggested further downside was on the way, and advised investors to use further bounces to "reduce risk, raise cash, and rotate" into stronger areas of the market.

Still, some analysts said the outlook may not be as negative as the market's knee-jerk reaction suggested.

"President Trump's address anchors expectations toward a relatively rapid de-escalation, with a stated timeline of weeks rather than months," Claudio Galimberti, the chief economist at Rystad Energy, wrote in a note.

However, any reopening of flows through the Strait of Hormuz is not guaranteed and would depend on security assurances, insurance coverage, and restored operational confidence, he cautioned.

"Until there is greater clarity on the path to de-escalation, markets are likely to remain highly volatile," Galimberti wrote.