Airlines, cruise lines and other companies in fuel-dependent industries dragged down U.S. stock indexes Monday after a weekend attack on Saudi Arabia’s biggest oil processing facility sent crude prices soaring.
The U.S. and international benchmarks for crude leaped more than 14% — comparable to the 14.5% jump in oil on Aug. 6, 1990, after Iraq’s invasion of Kuwait.
The Dow Jones industrial average fell 0.5%, breaking an eight-day win streak. The Standard & Poor’s 500 index, though down modestly, had its biggest decline in two weeks. American Airlines was the biggest decliner in the index.
Oil producers’ stocks jumped, and prices rose for Treasurys, gold and other investments that are seen as less risky.
The weekend attack halted production of 5.7 million barrels of crude a day, more than half of Saudi Arabia’s global daily exports and more than 5% of the world’s daily crude oil production. President Trump said the United States was “locked and loaded” to respond as his administration pinned the blame on Iran, which supports the Yemeni rebels who claimed responsibility for the attack.
The attack raised worries about the risk of more disruptions in the supply of oil at a time when the global economy’s strength is seen as shaky.
Still, analysts expressed doubts that the disruption in Saudi Arabia’s oil production would have much of an effect on the U.S. economy, at least in the short term.
“From a global perspective, there’s probably a concern,” said Willie Delwiche, investment strategist at Baird. “From a U.S. perspective, we produce more now than we used to, and our economy is less dependent on oil than it used to be.”
The S&P 500 fell 9.43 points, or 0.3%, to 2,997.96 — the index’s largest loss since Sept. 3. The Dow fell 142.70 points to 27,076.82. The Nasdaq fell 23.17 points, or 0.3%, to 8,153.54.
Smaller-company stocks were better performers. The Russell 2000 index rose 6.46 points, or 0.4%, to 1,584.60.
The stock market has been volatile for months as worries wax and wane about the U.S.-China trade war. Stocks’ most recent move had been up, boosted by renewed optimism in recent weeks about easing tensions between Washington and Beijing, and the S&P 500 had climbed back within 1% of its record.
Stocks lost their recent upward momentum Monday as investors weighed the implications of the attack in Saudi Arabia.
Analysts expected that the weekend’s attack would disrupt oil supplies only temporarily, but that didn’t quell worries that there may be future attacks.
“At a time when oil markets have been in the shadows of a weak global macroeconomic backdrop, the attack on critical Saudi oil infrastructure calls into question the reliability of supplies from not just one of the largest net exporters of crude oil and petroleum products but also the country that holds most of the world’s spare production capacity,” Barclays analyst Amarpreet Singh wrote in a report.
Benchmark U.S. crude oil soared $8.05 to settle at $62.90 a barrel. Brent crude oil, the international standard, jumped $8.80 to close at $69.02 a barrel.
That helped energy stocks in the S&P 500 surge 3.3%. Marathon Oil gained 11.6%, Devon Energy jumped 12.2% and oilfield services provider Halliburton climbed 11%.
The surge in oil prices weighed on shares of airlines, whose operations can be hurt by rises in fuel prices. American Airlines Group, which spent $3.7 billion on fuel and taxes in the first half of the year, dropped 7.3%. United Airlines slid 2.8%, and Delta Air Lines fell 1.6%.
Cruise ships also burn lots of fuel, making them vulnerable to oil price swings. Carnival shares fell 3.2%.
Prices for U.S. government bonds rose as investors moved into traditionally safe investments. Bonds’ yields fall when their prices rise, and the yield on the 10-year Treasury dropped to 1.85% from 1.90%. The yield on the two-year Treasury, which moves more on expectations for Federal Reserve policy, fell to 1.76% from 1.79%.
Gold, another investment seen as a safer place to park money, rose $12.20 to $1,503.10 an ounce.
General Motors slumped 4.3% after more than 49,000 members of the United Auto Workers went on strike. It wasn’t clear how long the walkout would last.
Smaller companies’ stocks once again did better than their larger rivals. The Russell 2000 is up nearly 7% since Sept. 4, while the big-company stocks in the S&P 500 are up only about 2%. If the trend lasts, it will mark a sharp turnaround from the last year, during which big companies outperformed their smaller rivals.
That long stretch of sharp underperformance may have created a raft of bargains, some analysts say. Small stocks recently hit their cheapest level relative to the big stocks in the Russell 1000 since summer 2003, according to Jefferies.
The week’s headline event is the Fed‘s meeting on interest rates. Investors are confident the central bank will cut short-term rates by a quarter of a percentage point, to a range of 1.75% to 2%. It would be the second such cut in two months as the Fed tries to protect the economy from a global slowdown and the effects of the U.S.-China trade war.
Investors will be looking for clues about what the Fed does next. “The forward guidance is going to be critical,” said Keith Buchanan, portfolio manager at Globalt Investments.
In other commodities trading Monday, wholesale gasoline rose 20 cents to $1.75 a gallon. Heating oil climbed 20 cents to $2.08 a gallon. Natural gas rose 7 cents to $2.68 per 1,000 cubic feet.