Wall Street Declines as Middle East Conflict Raises Inflation Concerns
U.S. stock markets moved lower on Thursday as the ongoing Middle East conflict entered its sixth day, raising concerns that higher energy costs could trigger renewed inflation pressures and complicate the Federal Reserve’s monetary policy outlook.
Despite the overall decline, strong corporate news from the technology sector helped limit the market’s losses. Broadcom projected that its artificial intelligence chip revenue could surpass $100 billion next year, pushing the company’s shares up 5.3%.
Technology Stocks Help Cushion Market Losses
Even though the U.S.–Israeli conflict with Iran continues to escalate, Wall Street indexes have held up better than markets in Europe and Asia this week. A rebound in technology stocks, which had been heavily affected during February’s selloff, has helped support U.S. equities.
The Nasdaq Composite, driven by technology companies, recovered its earlier weekly losses during the previous session and remains on track to finish the week in positive territory if gains continue through Friday.
Oil Prices and Strait of Hormuz Risks
Investors remain concerned about the potential impact of the conflict on global energy supplies, particularly if shipping disruptions occur in the Strait of Hormuz, one of the world’s most important oil transit routes.
A prolonged disruption could drive higher oil prices and shipping costs, further increasing inflation pressures at a time when U.S. tariffs and economic uncertainty are already complicating the Federal Reserve’s policy decisions.
Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management, said markets currently expect the conflict to remain relatively short-lived, which explains why equity markets have not fallen more sharply despite the recent surge in commodity prices.
However, analysts warn that oil prices approaching $100 per barrel could become a significant concern for investors.
Travel Stocks Hit as Oil Prices Rise
U.S. crude oil prices surged to their highest level since January, weighing heavily on travel-related companies.
The passenger airline sector dropped 5.7%, while shares of Royal Caribbean Cruises and Viking Holdings declined 1.4% and 3.4%, respectively.
At the same time, policymakers continue to monitor the economic impact of the conflict. Many central bank officials believe it is necessary to wait before adjusting policy.
However, investors now expect the Federal Reserve to delay its next interest rate cut. According to LSEG data, markets are pricing in a 25-basis-point rate cut in October instead of July due to rising inflation risks.
Major Index Performance
By 11:53 a.m. ET, U.S. stock indexes were trading lower:
- The Dow Jones Industrial Average fell 786.98 points (1.61%) to 47,952.43
- The S&P 500 dropped 49.45 points (0.72%) to 6,820.05
- The Nasdaq Composite declined 92.73 points (0.41%) to 22,714.76
Losses were broad across sectors. Healthcare, materials, consumer staples, and industrial stocks each fell more than 2%.
Meanwhile, the energy sector gained 0.7%, with APA Corporation rising about 4% as higher oil prices supported energy companies.
Market Volatility and Financial Stocks
Investor caution increased during the session. The CBOE Volatility Index (VIX) rose 1.92 points to 23.18, indicating higher market uncertainty.
The Russell 2000 small-cap index, which is sensitive to interest rate expectations, declined 1.8%.
Financial stocks also weighed on the market, with major banks such as JPMorgan Chase and Goldman Sachs trading lower.
Travel and Technology Stocks Move Higher
Despite broader market weakness, some companies posted strong gains.
Shares of travel booking platforms Booking Holdings and Expedia rose 10% and 7%, making them among the best performers in the S&P 500.
Technology and advertising companies also rallied after a report suggested OpenAI may scale back plans to integrate a shopping checkout system into ChatGPT, easing concerns for online marketplaces.
Meanwhile, Trade Desk shares surged 18% following reports that OpenAI had held early discussions with the company about advertising partnerships.
U.S. Jobless Claims Remain Stable
Economic data released Thursday showed that the number of Americans filing new unemployment claims remained unchanged last week, signaling continued stability in the U.S. labor market.
Market Breadth
Declining stocks significantly outnumbered advancing shares across U.S. exchanges:
- On the New York Stock Exchange, decliners led advancers by 3.34-to-1
- On the Nasdaq, the ratio was 2.33-to-1
The S&P 500 recorded five new 52-week highs and two new lows, while the Nasdaq Composite posted 27 new highs and 57 new lows.
