US STOCKS-Wall St ends sharply lower as Iran war intensifies, crude price soars

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By Stephen Culp and Johann M Cherian

NEW YORK, March 12 (Reuters) - U.S. stocks fell on Thursday, as Iranian strikes on two oil tankers sent crude prices surging toward $100 per barrel, further exacerbating inflation fears and sending investors fleeing equity markets.

All three major U.S. stock indexes slid more than 1.5% in a broad selloff, with everything but energy .SPNY and some defensive stocks suffering steep percentage losses. The S&P 500 notched its biggest three-day percentage drop in a month.

Iran's Supreme Leader Ayatollah Mojtaba Khamenei vowed to keep the crucial Strait of Hormuz shut, and the International Energy Agency $(IEA)$ warned the war on Iran was creating the largest-ever oil supply disruption, feeding fears of mounting inflation pressures.

Front month WTI CLc1 crude futures settled up 9.7% on the day, while Brent LCOc1 settled up 9.2%, touching $100 per barrel.

U.S. President Donald Trump's administration has told U.S. oil companies and shippers to prepare for a possible waiver of the century-old Jones Act, which governs domestic shipping, in an effort to mitigate rising fuel prices, according to sources familiar with the discussion.

"There’s a realization that a resolution to the Middle East conflict is being pushed further out," said Ryan Detrick, chief market strategist at Carson Group in Omaha. "It’s a sell first, ask questions later type of mentality. There hasn't been safe sector outside of energy. "

The U.S. Federal Reserve convenes on March 17, and while recent inflation data suggest price growth is under control, the 13-day-old war on Iran and the resulting spike is crude prices have yet to filter through the data. While the central bank is widely expected to leave its key interest rate unchanged, its updated summary of economic projections will be scrutinized for adjusted inflation estimates.

"Under the surface of soaring crude prices is the realization that the likelihood of Fed cuts later this year is quickly dwindling," Detrick added.

In light of recent credit quality concerns, Swiss private equity firm Partners Group warned private credit default rates could double in the next few years.

Morgan Stanley MS.N limited redemptions at one of its private credit funds, while JPMorgan Chase JPM.N reduced the value of some loans to private credit funds on Thursday. Their shares slid 4.1% and 1.6%, respectively.

Federal Reserve Vice Chair for Supervision Michelle Bowman outlined regulatory changes that would relax requirements for the amount of cash banks must set aside for potential losses, in a move seen as a victory for Wall Street lenders.

The Dow Jones Industrial Average .DJI fell 739.42 points, or 1.56%, to 46,677.85, the S&P 500 .SPX lost 103.22 points, or 1.52%, to 6,672.58 and the Nasdaq Composite .IXIC lost 404.15 points, or 1.78%, to 22,311.98.

Among the 11 major sectors of the S&P 500, energy was the biggest gainer, rising 1.0%, while industrials .SPLRCI sliding 2.5%, notched the steepest percentage loss.

Dating app operator Bumble BMBL.O jumped 34.2% after its fourth-quarter revenue guidance came in above estimates.

Discount retailer Dollar General DG.N slid 6.1% following its disappointing annual comparable sales forecast.

Agricultural fertilizer firms, which also rely on shipments through the Strait of Hormuz, advanced on surging prices. The S&P Fertilizer and Agricultural Chemicals index .SPLRCCHFA jumped 4.9%.

Chemical companies LyondellBasell LYB.N and Dow DOW.N advanced 10.3% and 9.3%, respectively, following a Citigroup upgrade on new export opportunities arising from supply chain disruptions in the Middle East.

On Friday, a raft of economic indicators is expected, including consumer sentiment, durable goods, job openings/labor turnover, and the broad-ranging personal consumption expenditures report.

Declining issues outnumbered advancers by a 4.18-to-1 ratio on the NYSE. There were 117 new highs and 198 new lows on the NYSE.

On the Nasdaq, 1,100 stocks rose and 3,600 fell as declining issues outnumbered advancers by a 3.27-to-1 ratio.

The S&P 500 posted 17 new 52-week highs and 25 new lows while the Nasdaq Composite recorded 33 new highs and 172 new lows.

Volume on U.S. exchanges was 19.96 billion shares, compared with the 20.05 billion average for the full session over the last 20 trading days.

(Reporting by Stephen Culp; Additional reporting by Medha Singh, Johann M Cherian and Utkarsh Hathi in Bengaluru; Editing by David Gregorio)

((stephen.culp@thomsonreuters.com))