US Stocks Slide as Iran Missile Strikes Escalate Middle East Conflict
Oil prices surge above $73 as investors weigh Strait of Hormuz disruption risks
US stocks fell sharply on Friday as Iran's Revolutionary Guards launched missiles and drones at Israel, escalating Middle East tensions and triggering fresh concerns about energy supply disruptions.
The Dow Jones Industrial Average dropped 602 points, or 1.2%, to close at 48,897, while the S&P 500 slipped 46 points, or 0.7%, to 6,863. The Nasdaq Composite declined 226.6 points, or 1%, to 22,652, putting the index on track for its worst monthly performance since March, according to market data.
The selling intensified after Iran's Revolutionary Guards launched missiles and drones at Israel at 03:48 UTC, marking a direct retaliation following Israel's preemptive strikes. Israel issued shelter-in-place alerts as its military confirmed identifying missile launches from Iran.
Oil prices extended gains, with Brent crude trading above $73 per barrel as investors priced in potential disruptions to the Strait of Hormuz, the critical maritime chokepoint through which roughly 20% to 25% of the world's seaborne oil passes daily. A significant interruption could push prices to $100-$130 per barrel, according to energy analysts.
The escalation marks a dangerous new phase in the conflict, moving from strikes on Iranian soil to direct Iranian attacks on Israeli territory. President Donald Trump earlier announced "major combat operations" in Iran, with US forces participating in strikes alongside Israeli military assets. The broader military campaign follows the collapse of nuclear talks in Geneva and growing concerns over Iran's nuclear program.
Beyond the immediate geopolitical shock, US markets were already under pressure from hotter-than-expected inflation data. Core producer prices rose 0.8% month-over-month and 3.6% year-over-year, exceeding the Federal Reserve's 2% target and fueling fears that interest rates will remain elevated for longer, economic data showed.
Technology stocks faced additional pressure, with AI-related volatility contributing to the Nasdaq's underperformance. Nvidia, a key artificial intelligence bellwether, slipped despite solid earnings, raising questions about the sustainability of AI capital expenditures that have driven much of the market's recent gains.
The confluence of geopolitical risk, inflation concerns, and sector-specific volatility pushed the S&P 500 to its weakest monthly performance in almost a year. Foreign funds were significant net sellers across global markets, indicating a broader risk-off sentiment as investors reassess exposure to regions affected by the intensifying conflict.
Looking ahead, market participants will focus on the potential for further escalation in the Middle East, the Federal Reserve's policy response to persistent inflation, and upcoming corporate earnings that could provide fresh signals about economic resilience. The energy sector may see continued support from elevated oil prices, while transportation and consumer discretionary stocks could face pressure from higher fuel costs.