Israel strikes on Iran: oil prices leap 7%

New York: Oil prices leapt and stocks weakened on Friday on worries that Israel's attack on Iranian nuclear and military targets could escalate further and damage the flow of crude around the world, along with the global economy, the Associated Press reported.

The S&P 500 was down 0.7% in early trading. The Dow Jones Industrial Average was down 508 points, or 1.2%, as of 9:35 am Eastern time, and the Nasdaq composite was 0.8% lower.

The strongest action was in the oil market, where the price of a barrel of benchmark US crude jumped 7.1% to $72.88. Brent crude, the international standard, rose 7.2% to $74.32 per barrel.

Iran is one of the world's major producers of oil, though sanctions by Western countries have limited its sales. If a wider war erupts, it could slow the flow of Iran's oil to its customers and keep the price of crude and gasoline higher for everyone worldwide.

But past attacks between Iran and Israel have seen prices for oil spike initially, only to fall later “once it became clear that the situation was not escalating and there was no impact on oil supply,” according to Richard Joswick, head of near-term oil at S&P Global Commodity Insights.

That has Wall Street waiting to see what will come next. For now, the price of oil has jumped, but only back to where it was earlier this year. “This is an economic shock that nobody really needs, but it is one that seems more like a shock to sentiment than to the fundamentals of the economy,” said Brian Jacobsen, chief economist at Annexe Wealth Management.

In the meantime, US stocks are falling to give back some of the big recent gains that had brought them back to the brink of their record. However, the losses are generally more modest than they've often been this year, when worries about President Donald Trump's tariffs have injected even more uncertainty into financial markets.

Companies that use a lot of fuel as part of their business and need their customers to feel confident enough to travel face some of the sharpest losses. United Airlines lost 5.2%, Delta Air Lines gave up 4.5%, and Norwegian Cruise Line Holdings dropped 2.9%.

Adobe fell 5.7% even though the company behind Photoshop reported a stronger profit for the latest quarter than Wall Street expected. Analysts called it a solid performance but said investors may have been looking for bigger increases to some of its revenue forecasts for the upcoming year.

They helped overshadow gains for US oil producers and other companies that could benefit from increased fighting between Israel and Iran.

Exxon Mobil rose 2.2%, and ConocoPhillips gained 2.3% because the leaping price of crude oil portends bigger profits for them.

Contractors who make weapons and defence equipment also rallied. Lockheed Martin and Northrop Grumman both rose 2.3%.

The price of gold climbed as investors searched for safer places to park their cash. An ounce of gold added 1.8% to $3,463.70.

Often, prices for Treasury bonds will likewise rise when investors are feeling nervous. That's because US government bonds have historically been seen as some of the safest options around. But Treasury prices fell Friday, which in turn pushed up their yields, in part because of worries that a spike in oil prices could drive inflation higher.

Inflation has been remaining relatively tame recently, and it's near the Federal Reserve's target of 2%, but worries are already high that it could be primed for an acceleration because of President Donald Trump's tariffs.

Higher inflation could tie the Fed's hands when it comes to interest rates. The Fed has been hesitant to lower interest rates recently, and it's been on hold this year after cutting at the end of last year, because it's waiting to see how much Trump's tariffs will hurt the economy and raise inflation.

While lower rates can goose the economy by encouraging businesses and households to borrow, they can also accelerate inflation.

The yield on the 10-year Treasury rose to 4.38% from 4.36% late Thursday.

In stock markets abroad, indexes slumped across Europe and Asia. Germany's DAX lost 1.4%, and France's CAC 40 dropped 1.1%, for two of the largest losses.