US stocks fell sharply on Friday, with all three major indexes closing at their lowest levels in more than six months, as escalating tensions in the Middle East and surging oil prices dampened investor sentiment.
The Dow Jones Industrial Average dropped 793.47 points, or 1.73%, to 45,166.64, entering correction territory on an intraday basis.
The S&P 500 fell 1.67% to 6,368.85, while the Nasdaq Composite slid 2.15% to 20,948.36, leaving it nearly 13% below its October peak.
The selloff marked the fifth straight weekly decline for the major averages, the longest losing streak in nearly four years, as markets struggled to absorb the economic fallout of a prolonged geopolitical conflict.
Oil surge and war fears weigh on sentiment
Investor sentiment remained under pressure as the conflict involving Iran continued to disrupt global energy markets.
Brent crude settled at $112.57 per barrel, while US crude rose to $99.64, both near multi-year highs.
The closure of the Strait of Hormuz, a critical oil transit route, has heightened fears of supply disruptions and prolonged inflationary pressures.
Despite signals from Donald Trump that diplomatic efforts are ongoing, markets showed little optimism about a near-term resolution.
“As per Iranian Government request, please let this statement serve to represent that I am pausing the period of Energy Plant destruction,” Trump said in a Truth Social post. “Talks are ongoing and, despite erroneous statements to the contrary by the Fake News Media, and others, they are going very well. Thank you for your attention to this matter!”
Still, uncertainty persists as Iran has reportedly rejected proposals to end the conflict, while the US considers further military deployments to the region.
Megacap weakness deepens market losses
Losses were led by large-cap technology and consumer stocks, which have been key drivers of market performance in recent years.
Shares of Nvidia fell about 2%, while Amazon dropped roughly 4%, weighing heavily on the broader market.
The weakness extended across sectors, with consumer discretionary stocks among the worst performers.
Cruise operators, including Carnival and Norwegian, declined sharply after weaker outlooks, adding to concerns about slowing demand.
The Nasdaq 100 has now entered correction territory, while the small-cap Russell 2000 index confirmed its own correction earlier.
Rate outlook shifts as inflation risks rise
Rising energy prices have complicated the outlook for monetary policy, reducing expectations that the Federal Reserve will cut interest rates this year.
Markets are now pricing in a roughly 25% chance of a rate hike by October, a sharp shift from earlier expectations of easing.
The surge in oil prices has intensified concerns about inflation, particularly as other commodities, including fertilizers, also move higher due to the conflict.
At the same time, US consumer sentiment has weakened, falling to a three-month low in March, reflecting growing unease about the economic outlook.
With geopolitical tensions unresolved and inflation risks mounting, investors appear increasingly cautious.
Until there is greater clarity on the trajectory of the conflict and energy markets, volatility is likely to remain elevated across global equities.
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