US Stocks Slide as Trump Announces Iran Combat Operations
Escalating Middle East tensions drive oil higher and boost safe-haven demand
US stocks declined on Thursday, February 26, 2026, as escalating tensions in the Middle East raised fears of broader conflict and energy supply disruptions. The S&P 500 fell 0.5% to 6,908.86, and the Nasdaq Composite dropped 1.2% to 22,878.38, while the Dow Jones Industrial Average edged up 0.03% to 49,499.20, reflecting investor caution and a shift toward defensive sectors. source
Oil prices advanced as geopolitical risks mounted. Brent crude futures rose 0.6% to $71.11 per barrel, and West Texas Intermediate added 0.2% to $65.53, supported by concerns over the Strait of Hormuz, a chokepoint for about one-fifth of global oil shipments. source The move added to the "geopolitical premium" in crude markets, where analysts have warned that sustained tensions or disruptions could push Brent toward $100 per barrel. source
Safe-haven assets attracted demand amid the risk-off tone. Gold climbed to $5,177 per ounce, and the CBOE Volatility Index (VIX) increased 3.9% to 18.63, signaling elevated market expectations for near-term volatility. Sector performance diverged: Information Technology fell 1.8%, Communication Services declined 0.8%, and Consumer Discretionary slipped 0.4%, while Financials gained 1.3%. source
President Donald Trump said the US began "major combat operations" in Iran, as Israel launched preventive missile attacks, according to reports. The announcement marks an escalation from earlier, limited strikes involving Israel alone and increases the potential for supply shocks if the Strait of Hormuz is disrupted. Iran has indicated it is preparing to retaliate, according to the Wall Street Journal.
Iran's military exercises earlier in the month temporarily restricted parts of the Strait of Hormuz, a move seen as strategic signaling amid negotiations and a US military buildup in the region. source Iranian officials have warned that the strait would be closed if a war with the US broke out, a scenario that could severely curtail global oil flows and spike prices. source
Beyond geopolitical headlines, markets are weighing other crosscurrents. Stalled US-Iran nuclear talks have contributed to uncertainty, while broader risk sentiment remains sensitive to inflation and Federal Reserve policy. OPEC+ has indicated it may consider a larger production increase, which could moderate price gains if tensions ease. source Investors are also monitoring sector rotations and earnings trends, particularly in technology, where valuations have come under scrutiny.
For now, the market is pricing a higher probability of prolonged instability in the Middle East, with energy and defense sectors poised to benefit while growth-oriented stocks face pressure. Any further escalation or signs of a direct threat to oil transit routes could extend volatility and deepen the shift toward defensive and commodity-linked assets.