Energy Shock Sends Stocks Lower as Iran Conflict Fuels Market Volatility

U.S. equities closed lower as rising energy prices tied to the escalating conflict in Iran pressured risk assets throughout the session. The S&P 500 declined 0.9%, the Nasdaq Composite dropped 1.0%, and the Dow Jones Industrial Average fell 0.8%.

The day began with sharp losses. By late morning, the major indices were down roughly 2.5% as investors reacted to another surge in oil prices and growing concerns that prolonged energy inflation could complicate the Federal Reserve’s monetary policy outlook. Early market breadth was particularly weak as the spike in crude oil triggered broad selling across equities.

The selloff was partly technical in nature. Similar concerns had surfaced in the previous session but were largely ignored by markets, making the early decline appear like a delayed reaction to the geopolitical shock.

Sentiment improved somewhat as the day progressed. Reports that tanker traffic through the Strait of Hormuz had slowed dramatically initially added to market anxiety, but conditions stabilized after President Donald Trump said the U.S. government would step in to support energy shipments. The administration directed the U.S. Development Finance Corporation to provide insurance coverage for carriers operating in the Persian Gulf after private insurers withdrew protection. Trump also indicated that the U.S. Navy could escort tankers through the strait if necessary.

Those developments helped ease some of the pressure in energy markets. Oil prices still finished sharply higher, but off their highs, with crude settling up 4.7% at $74.58 per barrel.

All eleven S&P 500 sectors ended the day in negative territory, although most recovered significantly from their worst levels.

Financials held up relatively well, nearly finishing in positive territory as major banks rebounded from early losses. Software-related financial technology names helped support the sector, with gains in companies such as Jack Henry & Associates and PayPal.

Technology stocks were mixed. Strength in enterprise software helped cushion the broader sector as Workday surged to become the top-performing S&P 500 component, while Microsoft also posted a solid gain. However, semiconductor weakness offset those gains, with the chip sector falling sharply and dragging down technology overall.

Communication services was another relative outperformer thanks to strength in telecom providers. AT&T rallied after reaffirming its guidance, helping stabilize the sector.

The materials sector recorded the steepest decline as precious metals pulled back sharply from recent highs. Elsewhere, corporate earnings produced several bright spots. Target and Best Buy both rallied following upbeat results, although company-specific news was largely overshadowed by geopolitical headlines.

Smaller companies lagged behind the large-cap benchmarks. The Russell 2000 dropped 1.8% and the S&P MidCap 400 fell 1.4%, reflecting investor caution as expectations for Federal Reserve rate cuts continue to shift further into the future.

Despite the broad decline, the market’s sharp recovery from its late-morning lows suggests investors are not yet pricing in a sustained downturn from the energy shock. For now, market direction appears closely tied to developments in oil prices and the evolving situation in the Middle East.

Our FTinvest 11 model portfolio declined 0.54% to close at 1,005.56, extending its recent period of consolidation. The portfolio continues to move modestly lower from its all-time high of 1,039.51, reflecting cautious market conditions at the start of March.

Despite the pullback, FTinvest 11 remains just above the 1,000 milestone, preserving the majority of its strong gains achieved earlier this year. The portfolio’s disciplined, value-driven framework continues to guide its positioning as it navigates short-term volatility while maintaining long-term performance strength.