March 20 Close: US Stocks Fall for Second Consecutive Day, but Oil Price Decline Narrows Stock Index Losses

On the morning of March 20 Beijing time, U.S. stocks recorded their second consecutive day of decline. However, driven by falling oil prices, all major indices have moved away from their intraday lows. Wall Street continues to monitor the latest developments in the Iran conflict.

The Dow Jones Industrial Average fell 203.20 points, or 0.44%, to 46,021.95; the Nasdaq dropped 61.73 points, or 0.28%, to 22,090.69; the S&P 500 declined 18.21 points, or 0.27%, to 6,606.49.

On Thursday, oil prices turned lower after Israel announced it was assisting in reopening the strategic Strait of Hormuz.

As of the time of writing, Brent May crude futures fell about 2%, to $104.79 per barrel, after briefly rising above $119 earlier in the session before turning lower. U.S. West Texas Intermediate (WTI) crude futures rose earlier but then dropped more than 3%, to $93.33 per barrel.

According to reports, following Israeli Prime Minister Netanyahu’s statement to the media that Israel is assisting the U.S. in reopening the Strait of Hormuz, U.S. oil prices declined. Netanyahu also said Iran has lost its ability to enrich uranium and produce ballistic missiles, and he added that the war could end faster than people expect.

Additionally, there are reports that the International Energy Agency (IEA) coordinated a release of 426 million barrels of crude oil to stabilize oil prices amid the Iran conflict. The agency announced that Japan, Canada, and South Korea will be the main contributors to this large-scale emergency oil reserve release in response to supply disruptions caused by the Iran war.

The IEA stated: “This emergency release will mainly consist of crude oil, while European contributions will primarily be in the form of refined products. Additionally, increased production from the Americas will serve as a supplement. Member countries have contributed 426 million barrels of oil. As part of the previous agreement, a total of 426 million barrels of crude oil are being released into the market, with 172 million barrels coming from the U.S.”

The Russell 2000 index briefly touched a correction zone on Thursday. During midday trading, it fell 0.7%—10% below its 52-week high—before slightly narrowing its decline. The latest drop was 0.5%. The Dow Jones Industrial Average followed, down 9.2% from its recent high.

Before the surge in international oil prices, Iran attacked a key liquefied natural gas export facility in Qatar, and Israel also struck Iran’s South Pars gas field. Iran later retaliated by attacking Qatar’s energy infrastructure.

U.S. President Trump warned that if more facilities in Qatar are attacked, the U.S. will “destroy the entire South Pars gas field on a large scale.”

Vital Knowledge analyst Adam Crisafulli said: “The core dilemma remains: the U.S. and Israel have ‘won’ the war in a traditional sense, but without deploying ground troops, there seems to be no military solution to reopen the Strait of Hormuz. This means that without some diplomatic solution (which currently seems to involve little effort), this waterway is unlikely to return to normal.”

As the vital Strait of Hormuz traffic has essentially come to a halt, leaders from the UK, France, Germany, Italy, the Netherlands, and Japan issued a joint statement on Thursday saying they are “ready to make appropriate efforts to ensure the safe passage through the strait.”

Peter Boockvar, Chief Investment Officer at One Point BFG Wealth Partners, said: “In the first few weeks of the war, people thought, ‘Well, this is terrible. How can the strait not be open? This will cause severe supply disruptions.’ But everyone believed that ‘the war would end soon. It could end at any time. This is unsustainable.’”

He continued: “Now, as the conflict enters its fourth week, the current situation makes investors think, ‘Hmm, maybe this war won’t end so quickly, and even if it does, we probably won’t see commodity prices return to pre-war levels. In my view, oil prices are unlikely to go back to $65 per barrel.’”

Boockvar added that, beyond concerns about oil prices, the growing worries in the tech and private credit sectors before the war will persist afterward, meaning investors will need to be more discerning in portfolio management in the future.

On the tech front, Micron Technology’s stock came under pressure on Thursday, falling 3.8%. Citigroup analysts specifically attributed this trend to “some profit-taking,” as the memory supply shortage helped the semiconductor company’s revenue nearly double in the recent quarter.