Oil prices surge and stocks slump after Israel attack on Iran
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(NEW YORK) — Oil prices surged and stocks slumped on Friday morning in the immediate hours after Israel began an attack on Iran targeting nuclear sites and senior military officers.
The strike stoked concern among investors about a possible wider conflict across the Middle East, which accounts for a large share of global oil production.
The U.S. West Texas Intermediate futures price — a key measure of U.S. oil prices — surged more than 7% on Friday. Brent crude future prices, another top measure of oil prices, also climbed more than 7%.
Stocks, meanwhile, tumbled in early trading on Friday as the ultimate outcome of the Israel-Iran conflict remained unclear.
The Dow Jones Industrial Average fell 575 points, or 1.3%, at the close of trading. The S&P 500 declined 0.8%, while the tech-heavy index slid 0.9%.
The jump in oil prices threatens to raise the price of gasoline for U.S. drivers, since crude oil makes up the top ingredient in car fuel.
Gas prices “will likely start to rise across much of the country later this evening in response to Israel’s attacks on Iran, which have caused oil prices to surge,” Patrick de Haan, the head of petroleum analysis at GasBuddy, said on Friday in a post on X.
A typical gallon of gas could tick up between 10 and 25 cents, de Haan added. The average price of a gallon of gas currently stands at $3.13, AAA data shows. The price increase anticipated by de Haan would amount to a hike of as much as nearly 8%.
“For now, I expect the rise to be noticeable, but limited,” de Haan said. “This could change.”
Israel launched dozens of strikes against Iran early Friday morning local time, striking at the heart of the country’s nuclear program, killing several nuclear scientists as well as high-ranking military leaders, according to Israeli officials.
Iran responded with an aerial attack involving about 100 drones, Israel said, but all of them were shot down before hitting their target.
The move downward for U.S. stocks followed losses in markets across Asia and Europe. The STOXX Europe 600 index fell about 1% by late afternoon local time. In Japan, the Nikkei 225 in Tokyo dropped 0.8% on Friday.
ABC News’ Riley Hoffman, Leah Sarnoff, Jack Moore, Jon Haworth, and Nadine El-Bawab contributed to this report.
(NEW YORK) — The United States’ economic growth forecast was cut sharply on Tuesday by the Organization for Economic Co-operation and Development, or OECD, which attributed the gloomy outlook in part to tariffs issued by President Donald Trump.
The OECD expects the U.S. economy to grow 1.6% in 2025, marking a substantial reduction from a 2.2% expansion forecast in March.
The nation’s economic growth will slow further in 2026, the OECD said, cutting its forecast for that year to 1.5%.
The dampened outlook for the U.S. mirrors a slowdown expected for the global economy, the OECD said, predicting global economic growth to fall from 3.4% in 2024 to 2.9% in 2025.
“Global economic prospects are weakening,” the OECD said in a statement, pointing to an array of factors that includes “substantial barriers to trade” and “heightened policy uncertainty.”
The OECD also warned of a potential upsurge in U.S. consumer prices, saying inflation could approach 4% by the end of 2025. The inflation rate currently stands at 2.3%.
“Higher trade costs, especially in countries raising tariffs, will also push up inflation,” the OECD said.
The OECD forecast echoes concerns raised by Wall Street analysts and Federal Chair Jerome Powell about the possibility that President Donald Trump’s tariffs may cause what economists call “stagflation,” which is when inflation rises and the economy slows.
A growing set of major retailers have warned of possible tariff-driven price hikes, including Nike, Target, Walmart and Best Buy.
Consumer attitudes have soured for four consecutive months as tariffs have taken hold, according to a survey conducted by the University of Michigan.
Consumer spending, which accounts for about two-thirds of U.S. economic activity, could weaken if shopper appetites diminish. In theory, a slowdown of spending could hammer some businesses, prompting layoffs that in turn further shrink consumer activity.
“Global trade tensions are hitting sentiment,” the OECD said.
U.S. tariffs remain above where they stood before Trump’s second term began, but a number of levies have rolled back in recent weeks.
A trade agreement between the U.S. and China last month slashed tit-for-tat tariffs between the world’s two largest economies and triggered a surge in the stock market. Within days, Wall Street firms softened their forecasts of a recession.
The U.S.-China accord came weeks after the White House paused far-reaching “reciprocal tariffs” on dozens of countries. Trump also eased sector-specific tariffs targeting autos, and rolled back duties on some goods from Mexico and Canada.
Trump’s steepest tariffs fell into legal limbo last week, casting uncertainty over a major swath of the president’s signature economic policy.
For now, key measures of the economy remain fairly strong.
The unemployment rate stands at a historically low level and job growth remains robust, though it has slowed from previous highs. In recent months, inflation has cooled, reaching its lowest level since 2021.
(WASHINGTON) — The Federal Reserve on Wednesday is set to announce its first decision on the level of interest rates since President Donald Trump last month intensified calls for lower borrowing costs and voiced eagerness about the potential “termination” of Fed Chair Jerome Powell.
In recent days, Trump has dialed back his attacks on Powell, saying he will not fire Powell before the end of the top central banker’s term next year. Trump has reiterated his displeasure with the level of interest rates, however, urging the central bank to lower them.
Despite pressure from the White House, Powell is widely expected to hold interest rates steady, according to the CME FedWatch Tool, a measure of market sentiment. The central bank’s benchmark interest rate currently stands at an elevated level of between 4.25% and 4.5%.
The rate decision arrives days after fresh data showed robust job growth in April, defying some fears of a hiring slowdown in the aftermath of Trump’s “Liberation Day” tariff announcement early last month.
Despite flagging consumer sentiment and market turmoil, the labor market has provided a bright spot since Trump took office. Meanwhile, inflation cooled in March, the most recent month for which data is available.
Last month, Powell raised the possibility that Trump’s tariffs may cause what economists call “stagflation,” which is when inflation rises and the economy slows.
If the Fed raises interest rates as a means of protecting against tariff-induced inflation under such a scenario, it risks stifling borrowing and slowing the economy further. On the other hand, if the Fed lowers rates to stimulate the economy in the face of a potential slowdown, it threatens to boost spending and worsen inflation.
Still, Powell pointed to solid economic performance as reason to take a patient approach as policymakers await the impact of tariffs.
“For the time being, we are well positioned to wait for greater clarity,” Powell told an audience at the Economic Club of Chicago. “Life moves pretty fast.”
Recession fears are mounting on Wall Street as Trump’s tariffs threaten to upend global trade. Goldman Sachs earlier this month hiked its odds of a recession from 35% to 45%. JPMorgan pegged the probability of a recession this year at 60%.
A government report last week showed the U.S. economy shrank over the first three months of 2025, much of which took place as Trump’s flurry of tariff proposals stoked uncertainty among businesses and consumers.
U.S. gross domestic product, or GDP, declined at a 0.3% annualized rate over three months ending in March, according to government data released on Wednesday. The figure marked a sharp dropoff from 2.4% annualized growth over the final three months of 2024.
The rate decision on Wednesday also marks the first adjustment of borrowing costs since Trump’s closely watched “Liberation Day” tariff announcement on April 2, which triggered the biggest single-day stock market drop since the COVID-19 pandemic.
Days later, Trump suspended a major swathe of the tariffs, sending the market to one of its largest ever single-day increases. A simultaneous escalation of tariffs on Chinese goods kept the effective tariff rate at its highest level in more than a century, the Yale Budget Lab found.
The White House is seeking to strike trade agreements with dozens of U.S. trade partners before the 90-day suspension of so-called “reciprocal tariffs” expires in July.
“As we gain a better understanding of the policy changes, we will have a better sense of the implications for the economy,” Powell said last month.
(WASHINGTON) — President Donald Trump ratcheted up tariffs on Canada late Thursday, stoking tensions with a top U.S. trade partner as the two sides try to hash out a trade agreement by the end of the month.
The Dow Jones Industrial Average tumbled 250 points, or 0.5%, in early trading on Friday, erasing some of the index’s gains in recent weeks as it approached a record high. The S&P 500 dipped 0.4%, while the tech-heavy Nasdaq fell 0.2%.
Canadian Prime Minister Mark Carney struck a forceful but measured tone in a response late Thursday night, saying on X that Canada would continue trade negotiations while defending its national interests.
Here’s what to know about new U.S. tariffs on Canada, and what they mean for fraught economic relations between the two allies:
When will Trump’s new tariffs on Canada take effect?
The fresh round of 35% tariffs on Canadian goods will take effect on Aug. 1, which matches the start date of levies issued for more than 20 other countries in recent days.
Aug. 1 also marks the deadline for ongoing trade negotiations between the U.S. and Canada.
Canada already faces 25% tariffs on exports to the U.S., though those levies exclude a host of goods compliant with the United States-Mexico-Canada Agreement, or USMCA, a free trade agreement.
Trump threatened to escalate tariffs beyond 35% if Canada opts to retaliate with tariffs on U.S. goods.
Canadian goods are also subject to sector-specific tariffs, such as 50% levies on steel and aluminum as well as 25% tariffs on non-USMCA compliant autos and auto parts.
Why did Trump propose new tariffs on Canada
Trump offered up two reasons for the fresh round of tariffs, which align with grievances voiced by Trump in previous trade announcements targeting Canada.
First, Trump faulted Canada for its alleged failure to stop the transport of fentanyl into the U.S.
“As you will recall, the United States imposed tariffs on Canada to deal with our Nation’s Fentanyl crisis, which is caused, in part, by Canada’s failure to stop the drugs from pouring into our Country,” Trump wrote in a letter to Carney, which was posted on social media late Thursday.
Between September and April, nearly all fentanyl seized by the U.S. came through the southern border with Mexico, according to U.S. Customs and Border Patrol, or CBP. Less than 1% of fentanyl was seized at the northern border with Canada, CBP found.
Next, Trump sharply criticized tariffs and other trade barriers erected by Canada that put U.S. businesses at a disadvantage when seeking to reach Canadian shoppers. Those barriers, Trump said in the letter, have brought about a U.S. trade deficit with Canada.
Last year, the U.S. ran a trade deficit with Canada of $63 billion, which marked a slight decrease from the previous year, according to the Office of the U.S. Trade Representative. By comparison, the U.S. ran a larger trade deficit last year with its other top trading partners: A $295 billion deficit with China and a $171 billion deficit with Mexico.
How did Canada respond to Trump’s new tariffs?
Carney posted a 114-word response on X late Thursday that appeared to avert further escalation of trade tensions while striking a firm posture in defense of Canada’s economic interests.
“Throughout the current trade negotiations with the United States, the Canadian government has steadfastly defended our workers and businesses,” Carney said. “We will continue to do so as we work towards the revised deadline of August 1.”
Carney responded directly to Trump’s allegations about Canada’s failure to address fentanyl, saying Canada had “made vital progress to stop the scourge of fentanyl in North America.”
“We are committed to continuing to work with the United States to save lives and protect communities in both our countries,” Carney added.
The tit-for-tat public proclamations from Trump and Carney follow a hiccup in trade negotiations late last month, when Trump suspended talks over Canada’s plans for a Digital Service Tax, which would have imposed a 3% levy on U.S. technology companies. Talks resumed days later after Canada abandoned plans for the tax.
Canada previously retaliated against tariffs with levies on U.S. goods, slapping tariffs on $20.7 billion of goods in March as well as 25% tariffs on non-USMCA compliant autos in April. As of early Friday, Canada had not announced another round of retaliatory tariffs in response to the latest levies.
In his social media post on Thursday, Carney noted that Canada has sought trade agreements with other countries in an effort to bolster its economy.
