U.S. equities fell on Thursday after Brent crude pushed back above $100 a barrel and the 10-year Treasury yield broke through 4.7%. After mostly brushing off the renewed U.S.-Iran conflict, investors began pricing in the risk of a prolonged war.
Major U.S. stock indexes tumbled on Thursday as investors started to price in the consequences of a renewed and prolonged conflict in the Middle East. The S&P 500 headed for its biggest decline in a month, falling 1.24% to 7,406.31.
What finally cracked the calm
The U.S. has conducted strikes against Iran 12 nights in a row, pushing oil and Treasury yields higher while stocks stayed flat. That composure broke after reports of attacks on tankers off the coast of Saudi Arabia.
Brent crude futures jumped above $100 per barrel and the 10-year Treasury yield broke through 4.7%, its highest level since January 2025. West Texas Intermediate crude jumped 6% to $92 per barrel, up more than 28% from the lows below $70 it hit earlier this month.
According to Interactive Brokers chief strategist Steve Sosnick, the market could no longer look past the moves: "It's too hard to ignore $100 oil."
Echoes of March
The selloff revived fears from March, when the S&P 500 fell more than 7.5% at its low point after the U.S.-Iran war began and oil surged nearly 70%. Investors then worried about stagflation, where higher energy prices reignite inflation while costlier fuel weighs on consumer spending.
But a wave of de-escalation announcements and renewed faith in the artificial intelligence trade then drove the index to rebound in April and May. The S&P 500 is now down about 2% since the consecutive strikes began on July 12.
Rate-hike bets climb
Sosnick said stocks were also likely pricing in a tighter borrowing environment, as bets on a rate hike grew. Odds of a Federal Reserve hike next week rose to almost 38% on CME's FedWatch tool, while chances of a hike at the September meeting topped 80% — up from about 12% and 53% a week earlier.
Wells Fargo Investment Institute strategist Sameer Samana said the reignited conflict is a reason to prepare for a larger drawdown in equities. Michael Tanney of Pereon Wealth said the spike matters more to headlines than to portfolios for now, yet warned a sustained price above $120 would mark the breaking point.
Source: CNBC
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