Wall St ends sharply lower as intensifying Iran war, soaring crude prompt selloff

NEW YORK, March 12 (Reuters) – U.S. stocks fell on Thursday, with the S&P 500 notching its biggest three-day percentage drop in a month as Iranian strikes on two oil tankers sent crude prices surging toward $100 per barrel, exacerbating already heightened inflation fears and sending investors fleeing equity markets.

All three major U.S. stock indexes slid more than 1% in a broad selloff, with everything but energy and some defensive stocks suffering steep percentage losses.

Iran’s Supreme Leader Ayatollah Mojtaba Khamenei vowed to keep the crucial Strait of Hormuz shut, and the International Energy Agency (IEA) warned the war on Iran was creating the largest-ever oil supply disruption, feeding fears of mounting inflation pressures.

Front month WTI crude futures settled up 9.7% on the day, while Brent settled up 9.2%, touching $100 per barrel.

U.S. President Donald Trump’s administration has told U.S. oil companies and shippers to prepare for a possible waiver of the century-old Jones Act, which governs domestic shipping, in an effort to mitigate rising fuel prices, according to sources familiar with the discussion.

“There’s a realization that a resolution to the Middle East conflict is being pushed further out,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “It’s a sell first, ask questions later type of mentality. There hasn’t been safe sector outside of energy. ”

The U.S. Federal Reserve convenes on March 17, and while recent inflation data suggest price growth is under control, the 13-day-old war on Iran and the resulting spike is crude prices have yet to filter through the data. While the central bank is widely expected to leave its key interest rate unchanged, its updated summary of economic projections will be scrutinized for adjusted inflation estimates.

“Under the surface of soaring crude prices is the realization that the likelihood of Fed cuts later this year is quickly dwindling,” Detrick added.

In light of recent credit quality concerns, Swiss private equity firm Partners Group warned private credit default rates could double in the next few years.

Morgan Stanley limited redemptions at one of its private credit funds, while JPMorgan Chase reduced the value of some loans to private credit funds on Thursday. Their shares underperformed on the day.

Federal Reserve Vice Chair for Supervision Michelle Bowman outlined regulatory changes that would relax requirements for the amount of cash banks must set aside for potential losses, in a move seen as a victory for Wall Street lenders.

According to preliminary data, the S&P 500 lost 103.99 points, or 1.53%, to end at 6,671.81 points, while the Nasdaq Composite lost 406.33 points, or 1.79%, to 22,309.81. The Dow Jones Industrial Average fell 745.55 points, or 1.57%, to 46,671.72.

Dating app operator Bumble jumped after its fourth-quarter revenue guidance came in above estimates.

Discount retailer Dollar General slid following its disappointing annual comparable sales forecast.

Agricultural fertilizer firms, which also rely on shipments through the Strait of Hormuz, advanced on surging prices. The S&P Fertilizer and Agricultural Chemicals index surged on the day.

Chemical companies LyondellBasell and Dow advanced following a Citigroup upgrade on new export opportunities arising from supply chain disruptions in the Middle East.

On Friday, a raft of economic indicators is expected, including consumer sentiment, durable goods, job openings/labor turnover, and the broad-ranging personal consumption expenditures report.

(Reporting by Stephen Culp; Additional reporting by Medha Singh, Johann M Cherian and Utkarsh Hathi in Bengaluru; Editing by David Gregorio)