Stock Drop and Oil Rises on Large Geopolitical Escalation – US Market Wrap

Wall Street buckled as reports of Iran’s retaliation for Israel’s attack on its nuclear facilities fueled fears that the conflict is escalating, with oil rising and stocks falling.

The S&P 500 fell more than 1%, wiping out this week’s gains. Airline and travel companies fell, while energy and defense stocks rose. West Texas Intermediate crude futures rose by more than 7%, the most since March 2022. Gold remained near its all-time high. Treasuries fell as rising oil prices fueled fears of a resurgence in inflation. The dollar edged higher.

Iran launched hundreds of missiles in response to Israel’s airstrikes on Tehran’s military and nuclear infrastructure, escalating a conflict that threatens to engulf the region and roil global markets. The Iranian attack, which Tehran claimed involved hundreds of ballistic missiles, is Tehran’s most aggressive move yet since Israel’s overnight raids killed top Iranian generals and severely damaged key military infrastructure.

The timing of the strike undermines a risk-on week in which a key inflation measure fell short of expectations while the US and China made progress in trade talks. The surge in oil prices raises new concerns about supply-side price pressures, potentially complicating the Federal Reserve’s rate path.
Trump urged Iran to accept a nuclear deal with Washington in order to avoid further attacks, which Prime Minister Netanyahu said would most likely occur in the coming days as Israel seeks to cripple Tehran’s nuclear program.