Oil Prices Jump, Stocks Slump After Iran Blasts

Global markets were rattled Wednesday as blasts in Iran that killed at least 103 fanned fears of the war between Israel and Hamas spreading further.

Oil prices spiked more than three percent after twin bomb blasts ripped through a crowd commemorating Revolutionary Guards general Qasem Soleimani, in what Iranian authorities labeled a "terrorist attack."

Soleimani was killed four years ago in a US strike in Iraq.

The closure of a Libyan oil field also lifted supply concerns.

"Heightened tensions in the Middle East following a bomb blast at a ceremony honouring a slain general in Iran have led to further risk-off sentiment and rising US yields," said Axel Rudolph, senior market analyst at online trading platform IG.

Equities were also under pressure as investors worried that the stocks rally in the final months of 2023, on hopes of interest rate cuts in 2024, may have gone too far.

The market got "got way ahead of itself" in December, said Hans Olsen, chief investment officer at Fiduciary Trust.

"There needs to be some sort of consolidation of this run, in order for it to last," he added, noting that to forge ahead without fundamental changes is "not healthy and not durable."

Meanwhile, minutes from the Federal Reserve's most recent policy meeting indicated that officials expect interest rates may need to remain high "for some time" to combat stubborn inflation.

Equities surged late last year on expectations that the US central bank would slash interest rates in 2024 as inflation cools.

However, analysts have warned that investors should prepare for a pullback, with tech titans such as Apple and Amazon likely to take a hit.

The tech-focused Nasdaq Composite Index continued a year-opening slide on Wednesday, seeing a 1.2 percent drop after falling 1.6 percent a day earlier.

Apple shares fell 0.8 percent while Nvidia and Facebook parent Meta Platforms slumped as well.

The Fed's post-meeting statement in December had indicated three interest rate cuts this year, though some market participants are tipping far more.

Briefing.com analyst Patrick O'Hare said the market welcomed Fed Chairman Jerome Powell's indication that there was some talk at the meeting about when it might be appropriate to begin reducing interest rates.

"Market participants will want to see today just how involved that conversation was," he said.

But the minutes released Wednesday did not go into details of discussions on when rate cuts might begin, likely weighing on investor enthusiasm.

David Morrison at Trade Nation said the US indices look particularly overbought as Europe's major indices began consolidating in mid-December.

"The upcoming fourth quarter earnings season may be the perfect excuse to take profits and it's possible that we get something deeper now, as there have been no serious corrections in the whole of this bull run," he added.

Data released Wednesday did not help sentiment, with US jobs openings declining in November and manufacturing sector activity contracting for a 14th consecutive month in December.

Friday sees the release of the closely watched US non-farm payrolls data.

West Texas Intermediate: UP 3.3 percent at $72.70 per barrel

Brent North Sea Crude: UP 3.1 percent at $78.25 per barrel

New York - Dow: DOWN 0.8 percent at 37,430.19 points (close)

New York - S&P 500: DOWN 0.8 percent at 4,704.81 (close)

New York - Nasdaq: DOWN 1.2 percent at 14,592.21 (close)

London - FTSE 100: DOWN 0.5 percent at 7,682.33 (close)

Paris - CAC 40: DOWN 1.6 percent at 7,411.86 (close)

Frankfurt - DAX: DOWN 1.4 percent at 16,538.39 (close)

EURO STOXX 50: DOWN 1.4 percent at 4,448.13 (close)

Hong Kong - Hang Seng Index: DOWN 0.9 percent at 16,646.41 (close)

Shanghai - Composite: UP 0.2 percent at 2,967.25 (close)

Tokyo - Nikkei 225: Closed for a holiday

Euro/dollar: DOWN at $1.0925 from $1.0942 on Tuesday