Wall Street closed sharply lower on Friday as a sudden escalation in Middle East tensions rattled global investors. Iran launched missiles at Israel overnight in retaliation for Israeli airstrikes targeting Iran’s nuclear facilities and missile factories — an exchange that marks the most direct military confrontation between the two nations in recent years.
Air raid sirens blared across Tel Aviv and Jerusalem while explosions lit up the night sky, sending shockwaves through global markets. Oil prices soared nearly 7% amid fears that the conflict could disrupt crude supplies from the region, especially if fighting threatens the Strait of Hormuz — a vital artery for a third of global oil shipments.
Elias Haddad, senior markets strategist at Brown Brothers Harriman, warned, “We could be looking at the brink of a full-scale military conflict. Any closure of the Strait of Hormuz would have severe repercussions for global energy markets and the broader economy.”
Energy stocks gained on the back of surging oil prices: Exxon Mobil rose 2.2% while Diamondback Energy jumped 3.7%. Meanwhile, airline stocks tumbled as investors braced for higher jet fuel costs — Delta Air Lines slid 3.8%, United Airlines lost 4.4% and American Airlines dropped 4.9%.
Defense contractors saw a flurry of buying as geopolitical risks rose. Lockheed Martin, RTX Corporation and Northrop Grumman all closed over 3% higher.
By the closing bell, the S&P 500 had dropped 1.13% to 5,976.97, the Nasdaq Composite lost 1.30% to 19,406.83, and the Dow Jones Industrial Average sank 1.79% to 42,197.79. Ten of the S&P 500’s eleven major sectors finished lower, with financials and technology leading the decline.
Photoshop-maker Adobe plunged 5.3% amid concerns that it’s lagging in adopting AI technology, despite raising its annual revenue outlook. On the flip side, Oracle surged 7.7% to a record high, buoyed by robust demand for its AI-driven services. Nvidia slipped 2.1% and Apple fell 1.4%.
Payments giants Visa and Mastercard each shed more than 4% following reports that major retailers are considering cryptocurrency payment systems that could bypass traditional card networks altogether.
Despite the geopolitical shock, economic data offered some comfort: a milder-than-expected consumer price report and steady jobless claims helped ease fears of inflation spikes. Fed policymakers are widely expected to hold interest rates steady in their upcoming meeting.
However, the weekly performance reflected investors’ unease: the S&P 500 ended down 0.4% for the week, the Nasdaq lost 0.6% and the Dow retreated 1.3%.
The University of Michigan’s latest consumer sentiment survey brought a sliver of optimism, showing the first improvement in confidence in six months amid trade uncertainties.
Overall, declining stocks outnumbered advancers within the S&P 500 by more than six to one, highlighting the depth of the selloff as investors brace for what could be a turbulent stretch for both global diplomacy and financial markets.