Stocks Sink, Oil Jumps as Mideast Tensions Build: Markets Wrap

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Wall Street tumbled Friday as Iran launched a retaliatory strike against Israel, escalating tensions in the Middle East and shaking global markets. The S&P 500 fell 1.1%, erasing the week’s gains, while the Dow Jones Industrial Average and Russell 2000 both dropped 1.8%. The Nasdaq 100 declined 1.3%.

Markets reacted sharply after Iran fired hundreds of missiles following Israeli airstrikes on its military and nuclear facilities, killing senior Iranian commanders. The geopolitical uncertainty triggered a flight from risk assets and a spike in oil prices. West Texas Intermediate crude surged 7.5%—its biggest one-day jump since March 2022—settling at $73.17 a barrel.

Airlines and travel stocks plunged, while defense companies and energy producers rallied. Gold climbed 1.4% to hover near record highs. Treasuries surprisingly sold off, with 10-year yields rising to 4.41%, signaling fears of renewed inflation due to rising oil prices. The dollar edged higher, while cryptocurrencies like Bitcoin and Ether also fell.

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“The lasting damage may be crude oil prices,” warned Louis Navellier of Navellier & Associates, noting the inflationary ripple effect. Fed policy expectations also shifted slightly, with traders dialing back bets on interest rate cuts ahead of next week’s policy meeting.

Strategists at Barclays advised investors to prepare for a more hawkish Fed tone, with possible revisions to inflation forecasts. Meanwhile, Wall Street’s fear gauge, the VIX, topped 20—indicating growing investor anxiety.

Corporate highlights included Adobe sliding on weak sales guidance, and Visa and Mastercard retreating as major retailers explore stablecoin payment systems. Amazon and Walmart reportedly discussed launching their own digital currencies.

The global rout extended to Europe and beyond, with the MSCI World Index down 1.1%. As tensions grow, investors brace for more volatility and potential ripple effects across the global economy.