Oil prices surged sharply and U.S. stocks dropped on Friday as investors reacted to escalating tensions following Israel’s strikes on Iranian nuclear and military sites. Fears are mounting that the conflict could deepen, disrupting global oil supply and threatening the broader economy.
By mid-morning Eastern time, the S&P 500 had fallen 1%, potentially wiping out the modest gains it made earlier in the week. The Dow Jones Industrial Average dropped 674 points, or 1.6%, and the Nasdaq composite was down 1.1%.
Energy markets saw the most dramatic movement. U.S. benchmark crude oil surged 6.8% to $72.65 per barrel, while Brent crude—the global benchmark—rose 7.1% to $74.30.
Iran, a key global oil producer, is under Western sanctions that already limit its crude exports. Any expansion of the conflict risks further reducing Iran’s oil output and shipments, putting additional pressure on global prices. Another potential flashpoint is the Strait of Hormuz, a narrow but vital shipping lane off Iran’s coast through which a significant portion of the world’s oil supply passes.
Despite the surge in prices, some analysts believe the current rise may be temporary. Past flare-ups involving Iran and Israel have often led to brief oil price spikes, which later eased once markets determined there would be no long-term supply disruptions. Richard Joswick, head of near-term oil analysis at S&P Global Commodity Insights, noted that supply had not yet been affected.
The jump in oil prices is adding to investor uncertainty, weighing on recent stock market gains that had brought major indexes close to record highs. Economist Brian Jacobsen from Annex Wealth Management described the development as “an economic shock nobody really needs,” but one that appears to be more about sentiment than a fundamental economic shift—at least for now.
Travel-related companies saw steep losses, as higher oil prices raise operating costs and potentially dampen consumer spending. Carnival dropped 5.4%, United Airlines fell 4.2%, and Norwegian Cruise Line also declined 4.2%.
On the other hand, oil producers and defense contractors saw gains. Rising crude prices are expected to boost profits for companies like Exxon Mobil, which climbed 1.5%, and ConocoPhillips, up 1.9%. Defense firms Lockheed Martin and Northrop Grumman both rose more than 3%, amid expectations that military conflict could drive increased demand for their products.
Gold prices also moved higher, with the precious metal up 1.5% to $3,454.40 per ounce, as investors sought safer assets. However, U.S. Treasury bonds did not follow the usual pattern in times of uncertainty. Instead of rising, their prices fell—raising yields. The 10-year Treasury yield rose to 4.41% from 4.36% the day before. Analysts attributed this partly to concerns that higher oil prices could reignite inflationary pressures.
Although inflation has recently remained close to the Federal Reserve’s 2% target, there are concerns that it could climb again—particularly due to lingering trade tensions and past tariffs imposed under former President Donald Trump. A stronger-than-expected consumer sentiment report from the University of Michigan also pushed yields up. The survey showed a rebound in confidence for the first time in six months, driven partly by Trump’s decision to pause some tariffs. Consumers’ inflation expectations also eased.
In corporate news, Adobe’s shares slid 6.1% despite beating profit expectations in its latest quarterly report. Analysts considered the performance solid, but some investors were reportedly hoping for stronger future revenue projections.
Meanwhile, Brazilian meat company JBS fell 2.6% in its debut on the New York Stock Exchange. The company is seeking broader international investment, though it faces criticism over environmental issues, corruption allegations, and anti-competitive practices.
Stock markets across Europe and Asia also posted losses. France’s CAC 40 dropped 1.2%, and Germany’s DAX declined 1.4%, marking some of the steepest losses overseas.
