(NEW YORK) — Global oil prices surged on Wednesday after an Iranian attack elicited a vow of reprisal from President Donald Trump, ending a brief calm that had renewed hope among investors of a negotiated resolution.
A benchmark index for worldwide crude prices climbed more than 7% on Wednesday, crossing above $90 a barrel.
Major stock indexes, meanwhile, tumbled. The Dow Jones Industrial Average plunged 710 points, or 1.3%, while the S&P 500 increased 0.6%. The tech-heavy Nasdaq declined 0.8%.
Oil prices account for a large share of the price of auto gasoline. The average price of a gallon of gas currently stands at $4.09, according to AAA, marking a 37% jump since war broke out in late February.
Trump on Wednesday said the U.S. will respond to an overnight missile attack launched by Iran.
“We’ll be hitting them [Iran] hard,” Trump told Fox News.
The U.S. intercepted an “attempted surprise attack” involving multiple ballistic missiles, which targeted U.S. forces in the Middle East on Tuesday, according to U.S. Central Command.
Oil prices have swung dramatically over recent weeks in response to on-again, off-again fighting.
Last month, oil prices briefly fell to their lowest level since before the war on news that a preliminary peace agreement had been reached.
A resumption of large-scale fighting between the U.S. and Iran, however, cast doubt over the staying power of that deal.
Shipping traffic in the Strait of Hormuz declined sharply as the war escalated. The maritime trading route facilitates transport of about one-fifth of global oil supply. In turn, worldwide oil prices soared above $100 a barrel.
Another round of price relief arrived on Monday after the U.S. paused attacks on Iran over the weekend, but the resumption of fighting on Tuesday rekindled price gains.
The Iran war set off a jump in overall inflation due in large part to a rise in oil prices and, in turn, fuel costs.
Fed Chair Kevin Warsh, who took the helm of the central bank in May, has repeatedly vowed to slash inflation to the Fed’s desired level of 2%. The annual pace of price increases currently registers at 3.5%.
“Persistently high prices are a burden for the American people,” Warsh told reporters in Washington, D.C., last month. “This committee will deliver price stability.”
The Fed held interest rates steady on Wednesday, describing “elevated” inflation attributed in part to “supply shocks that have driven price increases in certain sectors, including energy.”
Odds stand in favor of a quarter-point rate hike in September, the next time central bankers meet, according to the CME Group’s FedWatch Tool, a measure of investor sentiment.
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