World shares fell Thursday after more of what the U.S. military said were defensive strikes against Iran, while oil prices climbed more than $2 a barrel after dropping sharply a day earlier. The latest round of violence and the market whiplash around it show how decisions made by military and financial power centers ripple outward onto everyone else, from traders to consumers to workers facing higher costs.
Who Has the Power
U.S. officials said Central Command forces shot down four Iranian one-way attack drones that posed a threat near the Strait of Hormuz. The U.S. military also hit an Iranian ground control station in Bandar Abbas that was about to launch a fifth drone. Those attacks followed others earlier in the week. The military framed the strikes as “defensive” and “self-defense,” the usual language of an apparatus that gets to define its own violence as protection.
President Donald Trump said Iran is “negotiating on fumes” and said November’s midterm elections in the United States won’t make him rush into a deal to end the nearly three-month-old conflict. The remark tied the conflict to the calendar of electoral theater, while the machinery of war kept moving regardless of what voters are told to expect later in the year.
Who Pays for the Decisions
The market reaction was immediate. In early European trading, Germany’s DAX was nearly unchanged at 25,175.63 and the CAC 40 in Paris lost 0.4% to 8,172.84. Britain’s FTSE 100 slumped 0.9% to 10,416.62. The futures for the S&P 500 and the Dow Jones Industrial Average edged 0.1% lower. During Asian trading, Japan’s Nikkei 225 lost 0.5% to 64,693.12, while the Kospi in South Korea lost 0.5% to 8,185.29. Hong Kong’s Hang Seng index shed 1.3% to 25,006.16, while the Shanghai Composite index edged 0.1% higher to 4,098.64. In Australia, the S&P/ASX 200 declined 1.4% to 8,592.90, while Taiwan’s Taiex dropped 1.4%.
The hierarchy cost shows up most clearly in the price of fuel. Brent crude oil was up $2.14 at $94.44 a barrel in early Thursday trading after falling 4.6% to $92.25 on Wednesday. Benchmark U.S. crude gained $2.12 to $90.80. On Wednesday, it had fallen 5.5% to settle at $88.68, back to where it was in mid-April. Prices have moderated after surging to well over $100 a barrel, but only because markets are hoping the United States and Iran can reach an agreement to reopen the Strait of Hormuz and allow oil tankers to exit the Persian Gulf for deliveries again.
What the Markets Call Stability
On Wednesday, U.S. stocks inched to more records after oil prices declined more than 4%, easing pressure on consumers and businesses worldwide. The S&P 500 edged up by less than 0.1% to 7,520.36 and the Dow industrials rose 0.4%, to 50,644.28. The Nasdaq composite gained 0.1% to 26,674.73. All three indexes set all-time highs.
Stocks of companies with big fuel bills helped lead the way on hopes that lower oil prices will remove a big drag on their profits. Norwegian Cruise Line Holdings climbed 6.1%, and United Airlines rallied 6.3%. Delta Air Lines rose 3% and set an all-time high. The gains underline how the market celebrates cheaper fuel for corporations while the broader public is left to absorb the instability created by war and the threat of more of it.
Tan Boon Heng of Mizuho Bank in Singapore said, “Conflicting reports on the contours of a U.S.-Iran deal dampened risks sentiments as markets grow increasingly wary about the possibility of a deal,” and added, “While there is desire to maintain the ceasefire with both Iran and (asterisk)the) U.S. toning down language on renewed attacks and persisting with indirect channels of communication, it remains remarkably hard to envisage how a compromise can be reached on key issues.” His remarks captured the narrow logic of managed conflict: indirect channels, ceasefire language, and a compromise that remains difficult to imagine while the armed powers keep the terms.
In other dealings early Thursday, the U.S. dollar rose to 159.50 Japanese yen from 159.51 yen. The euro slipped to $1.1611 from $1.1626. The numbers moved, the institutions stayed in place, and the people at the bottom were left to live with the consequences of decisions made far above them.