Stocks Drop as Israel-Iran Conflict Causes an Oil Rally – US Market Wrap

Concerns on Wall Street that an escalation of tensions in the Middle East could lead to more direct US involvement pushed stocks lower, while weak economic data lifted bonds ahead of the Federal Reserve’s decision. Oil reached its highest level since January.

Risk-off sentiment prevailed, with the S&P 500 falling nearly 1%. West Texas Intermediate settled at around $75 per barrel. A gauge of crude-market volatility reached a three-year high.

The dollar rose the most in over a month. Aside from geopolitical risk. Treasuries rose as tepid reports on retail sales, housing, and industrial output supported bets that the Fed will cut rates at least once more in 2025, assuming the crude rally does not threaten the disinflationary path.

According to people familiar with the situation, President Donald Trump met with his national security team to discuss the escalating Middle East conflict, fueling new speculation that the United States is about to join Israel’s attack on Iran.
Trump posted a demand for Iran’s “UNCONDITIONAL SURRENDER” and warned of a possible strike against the country’s leader, Ayatollah Ali Khamenei. “We know exactly where the so-called ‘Supreme Leader’ is hiding. He is an easy target, but is safe there – We are not going to take him out (kill!), at least not for now,” Trump said on social media.

Traders also kept an eye on economic data, which showed US retail sales falling for the second month in a row, implying that concerns about tariffs and their finances prompted consumers to pull back after an early-year spending spree. Industrial production fell, and homebuilders’ confidence reached its lowest point since December 2022.