On Thursday, major U.S. stock indexes fell sharply as the market began to factor in the implications of renewed hostilities between the U.S. and Iran. Brent Crude futures surged past $100 per barrel, while the 10-year Treasury yield exceeded 4.7%, its highest since January 2025, following reports of attacks on tankers near Saudi Arabia.
This shift in sentiment marked a departure from previous weeks, where the stock market had largely ignored the potential for escalating conflict. Steve Sosnick, chief strategist at Interactive Brokers, noted that the market could no longer overlook the impact of $100 oil and rising interest rates. The S&P 500 is now down approximately 2% since the U.S. strikes began on July 12.
Analysts had previously suggested that the market was resilient enough to withstand energy shocks, but the current situation has reignited concerns about inflation and consumer spending.
JPMorgan equity strategists advised investors to consider buying into market dips caused by geopolitical tensions, while Wells Fargo's Sameer Samana warned that the renewed conflict could lead to a more significant drawdown in equities. The likelihood of a Federal Reserve rate hike has also increased, with expectations for a rise next week climbing to nearly 38%.
Michael Tanney, CEO of Pereon Wealth, emphasized that sustained oil prices above $120 could trigger serious economic repercussions, indicating that the current volatility may have lasting effects on the market