U.S. stocks showed mixed performance in Monday's late trading session, with the Nasdaq Composite turning positive. The price of U.S. benchmark West Texas Intermediate crude oil fell below $100 per barrel, temporarily easing market concerns about stagflation in the United States.
The Dow Jones Industrial Average dropped 346.00 points, or 0.73%, to close at 47,155.55. The Nasdaq Composite gained 18.17 points, or 0.08%, finishing at 22,405.85. The S&P 500 index declined by 20.31 points, or 0.30%, settling at 6,719.71.
WTI crude prices dropped below the $100 per barrel mark on Monday. This movement came as energy ministers from the Group of Seven nations were anticipated to discuss a potential release of crude oil reserves to address significant supply disruptions caused by the conflict involving Iran.
The international benchmark Brent crude traded higher by 6.38%, at $98.60 per barrel, after hitting an intraday peak of $119.50. This surge marked the first time oil prices have climbed above $100 per barrel since the outbreak of the Russia-Ukraine conflict in 2022.
According to sources, G7 energy ministers are scheduled to hold a virtual meeting on Tuesday morning to deliberate on a possible coordinated release of their petroleum reserves. Any action involving the release of reserves is expected to follow this ministerial discussion.
G7 finance ministers held their own virtual meeting on Monday, focusing on the Iran conflict. In a joint statement, the ministers affirmed they "stand ready to take necessary actions, including supporting global energy supply, for instance through a release of reserves." The G7 comprises Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
Following reports from a prominent UK financial media outlet that G7 officials were considering tapping strategic reserves, oil prices retreated from their daily highs, and stock futures also recovered from their lows.
Many on Wall Street view the $100 oil price level as a critical threshold for the economy, barring a swift resolution to the conflict and a subsequent price decline.
A social media post on Sunday evening stated that a "short-term rise in oil prices" was a "very small price to pay" to counter a nuclear threat from Iran.
Despite claims that the conflict "has been won," reports indicated little sign of de-escalation, noting the appointment of Mojtaba, son of Ayatollah Khamenei, as a new leader.
The president and chief investment strategist of Yardeni Research commented, "We cannot rule out a bear market if investors begin to anticipate a rerun of 1970s-style stagflation. If the oil shock persists, the Fed's dual mandate will be caught between rising risks of higher inflation and rising unemployment." The strategist added that he remains optimistic the conflict will be resolved within weeks, maintaining a base-case forecast of a technology-led economic boom and bull market.
Stocks in the financial and industrial sectors led the declines during early trading due to concerns about an economic slowdown. Defense and energy stocks were the only sectors that advanced.
U.S. crude oil surged more than 35% last week, recording its largest weekly gain since the futures contract began trading in 1983. The Dow Jones Industrial Average fell approximately 3% last week, marking its worst weekly performance since April of last year. The broader S&P 500 index declined 2%, while the Nasdaq Composite Index finished the week down 1.2%.