Financial Markets                      03/09 09:30

   

   NEW YORK (AP) -- Stock markets shuddered worldwide Monday on worries about 
whether the global economy can withstand spiking prices for oil, which briefly 
got to nearly $120 per barrel, their highest level since four summers ago.

   The S&P 500 fell 1.3%, coming off its worst week since October. The Dow 
Jones Industrial Average was down 721 points, or 1.5%, as of 9:35 a.m. Eastern 
time, and the Nasdaq composite was 1.2% lower. That followed even worse losses 
in European and Asian stock markets.

   Since the war with Iran began with attacks by the United States and Israel, 
the central worry for financial markets has been how high oil prices will go 
because of it and how long they will stay there. Early Monday, the price for a 
barrel of Brent crude, the international standard, briefly touched $119.50. It 
hasn't been that expensive since the summer after Russia invaded Ukraine in 
2022, another military conflict that likewise raised the risk for blockages in 
the global flow of oil.

   If oil prices stay very high for very long, households' budgets that are 
already stretched by high inflation could break under the pressure. Companies, 
meanwhile, would see their own bills jump for fuel and to stock items on their 
store shelves or in their data warehouses. It all raises the possibility of a 
worst-case scenario for the global economy "stagflation," where growth 
stagnates and inflation remains high.

   To be sure, oil prices pared their huge gains Monday following talk that 
some of the world's largest economies could coordinate a response to the 
spiking price of oil. A barrel of Brent crude pulled back to $101.76, though 
that's still up 9.8% from Friday.

   A barrel of benchmark U.S. crude, meanwhile, jumped 9.6% to $99.59 after 
briefly spiking as high as $119.48.

   The U.S. stock market has a history of bouncing back relatively quickly from 
past military conflicts, such as Russia's invasion of Ukraine in 2022, as long 
as oil prices don't stay too high for too long. And for all of the recent 
swings in the market, the S&P 500 index that sits at the heart of many 401(k) 
accounts is still within 5% of its record set in January.

   That has some professional investors suggesting drops in prices for stocks 
could ultimately offer opportunities to buy them at cheaper levels before they 
rise again.

   "We continue to believe that the current acute shortage of oil will be 
reversed in the coming months as new supply comes online and oil should drop 
significantly," according to Sameer Samana, head of global equities and real 
assets at Wells Fargo Investment Institute.

   All that hinges, though, on the flow of oil returning toward normal. At the 
moment, it's far from that.

   Consider the Strait of Hormuz, a narrow waterway off Iran's coast that a 
fifth of the world's oil sails through on a typical day. Now, tanker traffic 
has all but stopped because of worries about a possible attack by Iran.

   If the strait remains closed for only a few weeks, the price of oil could 
push to $150 per barrel of higher, according to oil and gas strategists at 
Macquarie Research.

   "Although we are not attempting to predict how long Hormuz transit will be 
substantially or completely curtailed, we are growing more confident that 
without an agreement and a fast cessation of all kinetic activity, the crude 
market will begin to break in days, and not in weeks or months," the 
strategists led by Vikas Dwivedi wrote in a report.

   The most immediate pain on Wall Street is hitting companies that have 
already big fuel bills.

   Carnival lost 7.3% because it has to fill huge cruise ships with fuel. 
United Airlines sank 6.9%, and Old Dominion Freight fell 3.8%.

   Retailers who have to ship in products from far away, while also needing 
their customers to have enough budget space leftover after gasoline to spend, 
also struggled. Best Buy fell 4.4%, and Williams-Sonoma dropped 4%.

   In stock markets abroad, where economies are more dependent on the import of 
oil and natural gas, stocks fell even more. South Korea's Kospi sank 6%, 
Japan's Nikkei 225 tumbled 5.2% and France's CAC 40 dropped 1.7%.

   A Chinese special envoy to the Middle East, Zhai Jun, called for an end to 
the attacks and said strikes on non-military targets and civilians should be 
condemned. Meanwhile, South Korean President Lee Jae Myung warned against 
hoarding, panic buying and collusion between refiners and gas stations.

   Both sides in the war struck new targets over the weekend, including 
civilian ones. Bahrain accused Iran of hitting one of the desalination plants 
that are crucial for drinking water in Gulf countries. Its national oil company 
declared force majeure after the country's sole oil refinery was attacked. 
Israel struck oil depots in Tehran, sending up thick smoke and causing 
environmental alerts.

   President Donald Trump said late Sunday that high oil prices at the moment 
are worth the cost.

   "Short term oil prices, which will drop rapidly when the destruction of the 
Iran nuclear threat is over, is a very small price to pay for U.S.A., and 
World, Safety and Peace," he said in a posting on his social media network.

   In the bond market, the yield on the 10-year Treasury remained at 4.15%, 
where it was late Friday.

   Worries about high inflation and oil prices are pushing upward on Treasury 
yields. But worries about a potentially slowing economy are pulling downward at 
the same time.

   Worries about possible stagflation worsened Friday following a surprisingly 
weak report on the U.S. job market showing that employers cut more jobs last 
month than they added.

   ___

   AP Writers Matt Ott, Kim Tong-hyung and Elaine Kurtenbach contributed.

   ---------

   itemid:458890210407eb0cba85c7e1a684c890