US stocks stumble as Middle East conflict rattles markets

It was a Monday morning that felt anything but ordinary on Wall Street. The opening bell rang, but the mood was sombre. Investors, glued to news tickers, watched as the US and Israel launched airstrikes on Iranian nuclear sites. Oil prices surged, and the market’s nerves were on full display. The world’s largest stock market was suddenly at the mercy of headlines from the Middle East.

Market sentiment shaken by conflict

The Dow Jones, S&P 500, and Nasdaq all opened lower, extending last week’s losses. The sell-off was swift and broad, sparing few sectors except energy and defence. “This conflict adds challenges to the already sizable collection of worries being maintained by the markets—those aren’t going away,” said Mark Malek, chief investment officer at Siebert Financial. “At the bare minimum the spike in crude, if it persists, will have an almost immediate impact on inflation numbers.”

Energy stocks, unsurprisingly, bucked the trend. Crude oil prices leapt over 2% in early trading, with Brent crude nearing $79 per barrel. The reason was clear: Iran’s Parliament was reportedly moving to close the Strait of Hormuz, a vital artery for global oil shipments. As oil surged, tech, auto, and consumer stocks slid, with investors bracing for higher costs and potential supply disruptions.

The broader market story, though, was one of caution. Ten of the eleven primary S&P 500 sectors finished in the red last week, with financials and technology leading the decline. The S&P 500 now sits around 3% below its all-time high, as traders reassess risk and growth prospects in a world suddenly more uncertain.

Experts warn of prolonged uncertainty

The escalation in the Middle East could not have come at a trickier time for US equities. “Two key risk factors for US equities have come into focus for us: their view that the conflict could take some time to play out, and the risk that it evolves into a broader, regional conflict,” explained Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets.

She added, “The broader the conflict becomes and the longer it lasts, the more problematic we think it will be for US equity markets.” Calvasina pointed out three major concerns:

• Heightened uncertainty on national security policy tends to put downward pressure on valuations.
• The fragile recovery in investor sentiment could be derailed, undermining one of the key drivers of recent gains.
• A sustained spike in oil prices could muddy the Fed’s inflation outlook and squeeze growth just as tariffs start to bite.

For investors, the message is clear: expect more volatility. The market’s next moves will hinge on developments in the Middle East, oil price stability, and any signs of diplomatic progress. Until then, risk appetite is subdued, and defensive sectors are in favour.

As the day wore on, traders kept one eye on their screens and the other on the news. The story of the US stock market, for now, is being written far from Wall Street—in the deserts and skies of the Middle East.

Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.

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