Tonight, a big plunge!

【Introduction】Oil prices rise, and the Dow Jones plunges

Brothers and sisters, the market tonight isn’t calm at all—it’s also taken a big plunge! Risk-off sentiment remains strong, and the surge in oil is weighing on stocks’ performance.

U.S. stocks plunge

On the evening of March 5, all three major U.S. stock indexes fell sharply. The Dow Jones dropped more than 600 points, the Nasdaq fell by about 0.2%, and the S&P 500 fell by about 0.5%.

At the same time, crude oil prices continued their surge. Brent crude was up about 3%, and New York crude was up more than 5%. Earlier, Iran said it used missiles to hit an oil tanker.

European stock markets fell collectively into the close.

The U.S. dollar index jumped in the short term.

China concept stock index fell by 1.5%.

After Trump said on Tuesday that the United States is preparing to provide risk insurance and escort services for ships navigating the Persian Gulf to ensure that they can pass through the Strait of Hormuz, worries in the market about a disruption to regional oil and gas supplies have eased somewhat. However, the White House did not provide a clear timeline on when the strait would resume safe passage for tankers. The strait accounts for the transportation of about 20% of the world’s oil supply.

U.S. Defense Secretary Pete Hegseth, at a briefing with reporters, said the United States is “achieving decisive victory” in its conflict with Iran, and that more military forces are arriving in the region.

The Iran conflict has entered its sixth day, and there are no signs of a resolution in the near term. The war has pushed up the prices of oil, natural gas, and related products, increased shipping freight rates, and brought a wave of supply-chain disruptions to producers and importers.

As inflation expectations rise, traders have already reduced their expectations for interest-rate cuts by the Federal Reserve.

Currently, the interest-rate swap market expects about 35 basis points of cuts by the end of the year, while expectations at the end of last weekend were 60 basis points.

On the eve of the release of the U.S. nonfarm payrolls report, data showed initial jobless claims held steady and were near one of the lowest levels in the past year, further indicating that the labor market remains in a low-layoff environment.

Analysts said, “Before tomorrow’s nonfarm employment report is released, the market will focus on the trajectory of the energy market and whether stability in risk assets will be challenged.”

Another analyst said that if the conflict is resolved in the coming weeks. “We believe this surge in prices will prove to be temporary, and the Brent crude price could fall back to around the $65 per barrel level indicated by the forward curve.”

The Nasdaq index performed a bit better, driven by a sharp jump in Broadcom’s share price. In Broadcom’s first fiscal quarter, adjusted net revenue was $19.31 billion, compared with analysts’ expectation of $19.26 billion. The company plans to implement a new share repurchase program with a total amount of up to $10 billion. The company expects second fiscal quarter revenue of roughly $22 billion, while analysts expected $20.53 billion. In addition, in its call, Broadcom projected that by 2027, revenue only from AI chips would exceed $100 billion.

Berkshire Hathaway, controlled by Warren Buffett, shares rose by about 2%. In the news, Berkshire’s newly appointed CEO Greg Abel said he used all after-tax proceeds to buy Berkshire shares and plans to do so every year he serves as CEO to demonstrate “absolute alignment of interests” with shareholders.

In addition, the company has also started to repurchase its own shares, which differs from Buffett’s recent decision to avoid buybacks. Abel said the company has long had a policy to repurchase shares when it believes their intrinsic value exceeds their market value; he added that this decision was made in consultation with Buffett.

Latest updates on the Iran situation

As of now, there are still no signs that the conflict has ended. Iranian officials are warning that attacks will intensify. Arab countries along the Persian Gulf coast report intercepting missiles and drones coming from Iran, while Israel is carrying out multiple rounds of airstrikes against Tehran.

Israel’s strike targets include the bases of Iran’s Islamic Revolutionary Guard Corps, as well as weapon storage and production facilities.

Air transportation is still severely disrupted. Since the fighting began, the number of canceled flights to Middle East hubs has exceeded 23,000 flight cancellations. At present, only a very small number of flights are operating to transport stranded passengers.

An explosion occurred near the coast of Iraq involving an oil tanker, indicating that the shipping risk in the Persian Gulf has spread beyond the Strait of Hormuz.

Saudi Arabia is urgently moving to fill the gap left in the global energy market by the Iran war. Saudi Aramco is using a nationwide pipeline to divert millions of barrels of crude oil from its main export points in the Persian Gulf to the Red Sea.

In the first four days of March, Saudi Aramco loaded about 10 million barrels of crude oil from Yanbu on the Red Sea coast. Based on average daily export volumes, that figure is three times Saudi Aramco’s Red Sea exports in February.