Worries about the war with Iran sent oil prices back to $100 per barrel and stocks sinking worldwide. The S&P 500 fell 1.5% Thursday and returned to big swings following a couple days of relative calm. The Dow Jones Industrial Average dropped 1.6%, and the Nasdaq composite sank 1.8%. The center of action was again the oil market, where the price of a barrel of Brent crude got as high as $101.59. Treasury yields climbed in the bond market on worries about higher inflation and fewer cuts to interest rates by the Federal Reserve.
Some two dozen states are challenging President Donald Trump's new global tariffs in court. On Thursday, the states filed a lawsuit over import taxes he imposed after a stinging loss at the Supreme Court. Democratic attorneys general leading the suit argue that Trump is overstepping his power with planned 15% tariffs on much of the world. Trump has said the tariffs are essential to address trade deficits. He imposed duties under Section 122 of the Trade Act of 1974 after the Supreme Court struck down tariffs he imposed last year under an emergency powers law. The new suit argues that law was intended to be used only in specific, limited circumstances.
India and the European Union have reached a free trade agreement to deepen economic and strategic ties. The deal covers up to 2 billion people and was reached on Tuesday after nearly two decades of negotiations. It will likely take several months before the agreement takes effect. The deal represents 25% of global gross domestic product and a third of global trade. The agreement aims to lower tariffs, ease regulatory barriers and expand cooperation across goods and services. India will reduce tariffs on 96.6% of EU exports while the EU will reciprocate for nearly 99% of Indian shipments. The deal also includes a framework for deeper defense and security cooperation.
Central bankers from around the world have expressed full support for U.S. Federal Reserve Chair Jerome Powell. This comes after President Donald Trump escalated his confrontation with the Fed by threatening criminal charges. The central bankers, including European Central Bank President Christine Lagarde, emphasized the importance of central bank independence for economic stability. The dispute ostensibly centers on Powell's congressional testimony in June about renovation costs, but Trump has criticized Powell for not cutting rates faster. Economists warn that a politicized Fed could harm its credibility.
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Chinese leader Xi Jinping told Asia-Pacific leaders his country would help to defend global free trade as U.S. President Donald Trump snubbed an annual economic regional forum. Xi took center stage at the Asia-Pacific Economic Cooperation summit that began Friday in the South Korean city of Gyeongju, as Trump left the country a day before the summit opened after reaching some deals with Xi meant to ease their escalating trade war. This year's two-day APEC summit has been heavily overshadowed by the Trump-Xi meeting that was arranged on the sidelines.
