Wall Street dips and marks weekly losses amid Middle East disruption

Wall Street ended Friday’s session with sharp losses, as the S&P 500 closed at its lowest level in six months, with the war between the United States and Israel against Iran entering its fourth week, heightening concerns over inflation and the potential for higher interest rates.

The fallout from the Middle East conflict continues to show no signs of easing. The US military has deployed an amphibious assault ship carrying thousands of additional Marines and sailors to the region, while Iran’s new Supreme Leader praised the country’s “unity” and “resistance.”

Jack Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma, said: “The market is starting to accept that this conflict could last longer than initially expected, and I think that’s why markets are pulling back. It may not last just a few weeks — it could stretch into months.”

Big tech stocks decline:

Shares of major technology companies fell, with Nvidia and Tesla dropping more than 3% each. Meanwhile, Alphabet, Meta, and Microsoft declined by around 2% each.

US Treasury bonds also fell for a third consecutive session, alongside a broader selloff in government bonds in the UK and Europe, as the Middle East conflict kept oil prices elevated and reinforced inflation concerns.

US interest rate futures indicate that markets now see a higher probability of the Federal Reserve raising rates by the end of 2026 than cutting them, according to the CME FedWatch tool.

Padhraic Garvey, Head of Global Rates and Debt Strategy at ING in New York, said: “We are in an environment that is pushing rates higher, driven by expectations of rising inflation linked to oil prices. With the war entering its fourth week, this pressure does not appear to be fading anytime soon.”

Stock index performance:

The S&P 500 fell 1.51% to close at 6,506.48 points, its lowest level since September, posting a weekly loss of 2%.

The Nasdaq dropped 2.01% to 21,647.61 points, now about 10% below its October 29 peak, also recording a 2% weekly decline.

The Dow Jones Industrial Average declined 0.96% to 45,577.47 points, with weekly losses reaching 2.1%.

The Russell 2000 index of small-cap stocks fell 2.26%, leaving it down 10% from its January 22 high.

Nine of the 11 S&P 500 sectors ended lower, led by utilities, which dropped 4.11%, followed by real estate, down 3.15%.

The energy sector was nearly flat on the day but marked its thirteenth consecutive weekly gain — its longest streak since at least the late 1980s — supported by geopolitical tensions in Venezuela and the Middle East.

Friday also saw the simultaneous expiration of stock options, index options, and futures contracts — known as “triple witching” — driving a surge in trading volumes to 27.5 billion shares, compared to an average of 20.1 billion over the previous 20 sessions.

Over the week, the S&P 500 lost about 1.9%, while both the Nasdaq and Dow fell more than 2%. Since the start of the Iran war on February 28, the S&P 500 has declined 5.4%, the Nasdaq is down 4.5%, and the Dow has dropped about 7%, with all three indexes trading below their 200-day moving averages, reflecting deteriorating investor sentiment.

Shares of Super Micro Computer plunged 33% after three individuals linked to the company were accused of smuggling at least $2.5 billion worth of AI technology to China, while rival Dell Technologies saw its shares rise.

Meanwhile, FedEx provided an upbeat outlook, noting that global demand remains stable despite geopolitical tensions, sending its shares up about 1%.

Declining stocks outnumbered advancers in the S&P 500 by a ratio of 3.4 to 1, with the index recording 11 new highs and 36 new lows, while the Nasdaq posted 43 new highs versus 274 new lows.