Oil stops flowing, and Wall Street stops growing

MANHATTAN (CN) — A slow week for economic data was roiled by renewed tensions with Iran, a slew of new tariffs, and spikes in energy prices.

Early in the week barrels of Brent crude rose by more than $10 after Houthis said they would block another shipping lane in the Red Sea. On Thursday, the Houthis made good on their threats, striking tankers off the Saudi Arabian coast and sending barrels of Brent crude shooting up to more than $100 per barrel.

Equities took minor hits all the week, but after Thursday’s oil price spike they tumbled. Oil prices dropped and equities recovered somewhat on Friday news that Pakistan was pushing for new Iran-U.S. peace talks.

By the closing bell Friday, as Brent crude settled around $96 per barrel, the Dow Jones Industrial Average had lost 200 points for the week, the S&P 500 dropped 46 points, and the Nasdaq declined 545 points.

President Trump has not backed off his threats against Iran, vowing retaliation against civilian targets if Iran resumes strikes in the Strait of Hormuz. He also has threatened new 50% tariffs against Canada after he blamed them for “filthy, polluted, and unhealthy air” wafting into the Northeast from wildfires in Ontario.

Those new tariffs were then followed by double-digit duties on 60 countries, meant to replace the 10% levies that expired Friday. The countries affected account for more than 99% of all U.S. imports.

Trump has focused particularly on the European Union, accusing the EU in a social media post of “ROBBING American Companies, and in turn the American Taxpayer” after Google was fined more than $1 billion by EU authorities.

However, markets did not react negatively to the new raft of tariffs, with economists claiming the new Canadian tariff would inflame U.S.-Canada relations but would not have major implications for growth or inflation.

“While a fresh round of tariff threats may disrupt the summer lull, it’s unlikely to have the same disruptive power as it did last year,” Carsten Brzeski, global head of macro at ING Bank, wrote in an investor’s note.

The only other major economic news this week came in the labor market, with unemployment claims hitting a historic low point. About 187,000 initial unemployment claims were filed with the Labor Department for the week ending July 18, less than expected and the lowest weekly level since 1969.

Continuing claims, of those who keep pursuing unemployment benefits, also fell slightly to just below 1.8 million for the week July 11.

Experts were encouraged but did not quite pop Champagne corks, noting July is a notoriously unreliable month for employment data given a slew of seasonal issues. However, the news is welcome amidst the swirl of negativity on energy prices.

Matthew Martin, senior U.S. economist at Oxford Economics, wrote in an investor’s note that “the extremely low level of claims is hard to ignore and the trend in continuing claims remains encouraging … [and] will keep a lid on the unemployment rate in the months ahead.”

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