Oil Spike, AI Spending Concerns Weigh on Markets – US Market Wrap

A jump in oil driven by the intensifying Iran war pressured stocks and bonds, with Wall Street also shaken by renewed doubts over whether massive AI investments will deliver returns. Brent crude climbed above $100 a barrel, fueling inflation concerns and lifting Treasury yields to their highest levels this year. The S&P 500 slid 1.2%, its biggest decline in a month, while a megacap index posted its worst session since the April 2025 tariff-driven rout. Despite solid earnings, Alphabet dropped 6.9% after boosting its capital spending outlook, while Tesla plunged 15% as profits fell despite strong electric-vehicle deliveries. The dollar strengthened.

The renewed escalation in the US-Iran conflict showed little sign of cooling, with neither Washington nor Tehran stepping back or signaling fresh negotiations. President Donald Trump threatened to ramp up attacks on Iran and said the country would be held accountable for any further strikes by Yemen-based Houthis on Red Sea shipping. He also told Axios he is weighing a “massive attack” and is close to a decision, according to the report.

These risks come as investors seek clearer proof that heavy AI spending is translating into growth rather than eroding profitability. Alongside Alphabet, Meta, Microsoft and Amazon indicated in April they could spend as much as $725 billion this year on AI initiatives, raising concerns about margin pressure and whether valuations remain justified.