US stocks closed sharply lower on Friday, as escalating tensions in the Middle East and surging oil prices weighed on investor sentiment and raised concerns about inflation and interest rates.
The Dow Jones Industrial Average fell about 0.96% or 443 points to 45,577.47, while the S&P 500 dropped 1.51% to 6,506.48.
The Nasdaq Composite led losses, declining 2% to 21,647.61.
Markets extended losses as the US-Israel conflict with Iran entered its fourth week, with no signs of de-escalation.
Reports indicated increased military deployments in the region, including additional US Marines, while Iran continued strikes targeting energy infrastructure.
Tech heavyweights drag markets lower
Losses were led by major technology stocks, including Nvidia, Microsoft, Alphabet, Tesla, and Meta Platforms, all of which declined during the session.
The selling pressure was broad, with few sectors spared.
Even defensive sectors such as utilities came under pressure as rising bond yields reduced their appeal.
The small-cap-focused Russell 2000 slipped into correction territory, defined as a decline of 10% from its recent high.
Meanwhile, the Dow and Nasdaq hovered close to similar thresholds.
All three major indexes have now declined for the fourth consecutive week and have moved below their 200-day moving averages, signaling weakening market momentum.
Oil surge fuels inflation fears
A key driver behind the selloff was the sharp rise in oil prices, as geopolitical risks disrupted energy markets. Brent crude climbed above $111 per barrel, while West Texas Intermediate traded above $97.
The surge was partly triggered by reports that Iraq declared force majeure on oilfields operated by foreign companies, intensifying supply concerns.
Rising energy costs have heightened fears of persistent inflation, complicating the outlook for monetary policy.
US Treasury yields climbed for a third straight session, reflecting expectations that interest rates may remain elevated.
US rate futures now suggest the Federal Reserve is more likely to raise rates than cut them by the end of 2026, according to CME’s FedWatch tool.
Volatility rises amid geopolitical uncertainty
Friday’s session also coincided with the quarterly “triple witching” event, when stock options, index options, and futures contracts expire simultaneously, often amplifying trading volumes and volatility.
Geopolitical developments continued to dominate market sentiment.
Reports of ongoing strikes between Iran and Israel, as well as preparations for potential ground troop deployments, added to investor uncertainty.
“If this is an escalation involving troops on the ground, then we’re probably in for at least a couple more weeks of this sort of market of higher oil prices, high gas prices; you’re hanging on every headline about energy infrastructure in the region,” said Baird investment strategist Ross Mayfield in a CNBC report.
“Quite frankly, equity markets haven’t sold off in a way that would reflect this sort of event yet, so there could still be some some downside ahead.”
The combination of rising oil prices, elevated bond yields, and geopolitical risks has created a challenging environment for equities, with investors increasingly cautious about the near-term outlook.
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