Investor enthusiasm for stocks waned on Friday as geopolitical tensions resurfaced, driving all three major U.S. indexes into the red. Iran’s missile attack on Israel, in response to Israel’s earlier strikes on Iranian military and nuclear sites, revived concerns of wider conflict in the Middle East.
The reaction from financial markets was immediate, with most sectors down and oil prices spiking.
Markets had previously been relatively resilient this week. A lower-than-expected inflation reading and in-line jobless claims helped keep the comfort that the Federal Reserve may keep interest rates in status quo in its next meeting. But those gains were erased as investor sentiment turned sharply negative on Friday.
The S&P 500 ended 1.13% lower at 5,976.97, the Nasdaq lost 1.30% to 19,406.83, and the Dow Jones Industrial Average fell 1.79% to 42,197.79. Ten of the 11 major S&P 500 sectors finished down, led by a 2.06% drop in financial stocks and a 1.5% decline in technology stocks.
Oil markets instantly responded. The price of oil jumped by almost 7 percent on fears that there could be disruptions to Middle Eastern oil supplies, particularly if shipping in the Strait of Hormuz is hindered. Reaction in the U.S. energy sector was less immediate—ExxonMobil gained 2.2%, and Diamondback Energy rose 3.7%.
Airlines, which ordinarily are acutely sensitive to changes in the price of fuel, reversed sharply. Delta Air Lines slid 3.8 percent, United Airlines dropped 4.4 percent, and American Airlines declined 4.9 percent. Defense stocks, however, gained, signaling that people were heading for safer assets in the face of all of the uncertainty. Lockheed Martin, RTX Corporation, and Northrop Grumman were among the biggest gainers, rising by more than 3 percent each.
Tech shares were mixed. Adobe fell 5.3 percent on worries that its adoption of artificial intelligence lags competitors, even as it raised its full-year revenue outlook. Oracle, by contrast, gained 7.7 percent and traded at an all-time high, as demand for its AI-driven services remained strong. Nvidia fell 2.1 percent, while Apple lost 1.4 percent.
Visa and Mastercard, for example, both fell more than 4% after reports that several large U.S. retailers are considering building their own direct payment systems based on cryptocurrency that would bypass traditional card networks.
Even on Friday’s sell-off, the losses for the week were muted. The S&P 500 was down 0.4 percent, Nasdaq dropped 0.6 percent, and the Dow fell 1.3 percent. Analysts said recent economic data—such as tepid producer prices and trendless jobless claims—had helped limit the downside.
Investor sentiment was already beginning to turn before the escalation. The University of Michigan’s consumer sentiment survey notched its first positive uptick in six months in June, suggesting underlying economic stability. But with risks in the geopolitical landscape rising, volatility may stay elevated in the short run.
Otherwise, trading was brisk, with nearly 18 billion shares changing hands—just below the 20-day average. On the S.&P. 500, decliners outnumbered advancers by more than 6 to 1.
