The S&P 500 fell 1.2% to close at 5,150 on Wednesday as investors reacted to the outbreak of war involving Iran, sparking fears of a wider conflict in the Middle East and potential disruptions to global energy supplies.
"This is nothing," Warren Buffett, chairman and CEO of Berkshire Hathaway, said in an interview with CNBC. He noted that while Berkshire's own stock has declined, the company is "well-prepared" for any resulting economic fallout, including a recession or an energy crisis.
The sell-off saw trading volume jump 15% above its 20-day average. The CBOE Volatility Index, or VIX, surged 18% to 19.5, its highest level in three months. The energy sector was the sole gainer, with the Energy Select Sector SPDR Fund (XLE) rising 2.5%. In contrast, the Technology Select Sector SPDR Fund (XLK) and the Consumer Discretionary Select Sector SPDR Fund (XLY) were the biggest laggards, falling 2.1% and 2.4% respectively.
The market's sharp reaction underscores investor anxiety over the war's potential to trigger a significant spike in oil prices and disrupt global supply chains, which could fuel inflation and dampen economic growth. West Texas Intermediate crude oil jumped 3.5% to $88.50 a barrel, and gold, a traditional safe-haven asset, rose 1.8% to $2,380 an ounce. All eyes will be on the upcoming OPEC+ meeting next week for signals on how major oil producers will respond to the crisis.
Buffett's comments, however, provided a measure of calm for some investors. He has a long history of advising investors to look past short-term market shocks and focus on the long-term earnings power of businesses. His statement that Berkshire is well-prepared for a recession or energy crisis highlights the defensive positioning of his conglomerate, which has significant holdings in insurance, utilities, and railroads.
Despite Buffett's remarks, the market remains on edge. The advance/decline line on the New York Stock Exchange was overwhelmingly negative, with decliners outnumbering advancers by a 4-to-1 margin. The sell-off was broad-based, with 10 of the 11 S&P 500 sectors finishing in the red. The flight to safety was evident not only in the rally in gold but also in the bond market, where the yield on the 10-year U.S. Treasury note fell 8 basis points to 4.32%.
This article is for informational purposes only and does not constitute investment advice.
