Stocks Reverse Early Gains as Oil Spike and Geopolitical Tensions Weigh on Sentiment

The stock market faced a volatile session, ultimately closing lower as a surge in oil prices and renewed geopolitical uncertainty offset a strong start. The S&P 500 (-0.6%), Nasdaq Composite (-0.6%), and Dow Jones Industrial Average (-0.6%) traded firmly higher early on before reversing course and finishing near session lows.

The turning point came as energy markets reacted to escalating uncertainty around U.S.–Iran negotiations. Reports suggested Iran may not send delegates to upcoming talks in Pakistan, while the current ceasefire approaches expiration. Tensions intensified late in the session after CNBC reported that Iran would not participate unless the U.S. softens its stance, alongside news that Vice President JD Vance canceled his planned diplomatic trip.

Crude oil futures climbed $2.40 (+2.7%) to $91.80 per barrel, prompting a reassessment of risk after equities recently pushed to record highs on expectations of de-escalation.

Market breadth was notably weak, with only one sector finishing in positive territory. The energy sector (+1.3%) benefited from higher oil prices, supported by a strong earnings-driven move in Halliburton.

The information technology sector (-0.2%) showed relative resilience but ultimately succumbed to late-session selling. Software stocks continued to outperform, with Microsoft standing out among mega-cap names and the iShares GS Software ETF advancing 0.5%.

However, gains in software were offset by weakness in key hardware and semiconductor names. Apple declined after announcing that CEO Tim Cook will step down, while NVIDIA also traded lower, contributing to broader pressure in large-cap tech.

The consumer discretionary sector (-0.5%) slipped into negative territory late in the session. Amazon managed a modest gain following news of an expanded partnership with Anthropic, including a potential $25 billion investment tied to long-term cloud commitments. Elsewhere, D.R. Horton rallied on strong earnings, while Tractor Supply plunged after missing expectations.

Earnings were a central driver of individual stock performance, with many companies exceeding estimates. Northern Trust emerged as a top S&P 500 performer, while UnitedHealth Group led gains within the Dow.

Still, a recurring theme weighed on sentiment: strong results paired with cautious outlooks. Companies such as Northrop Grumman and GE Aerospace sold off despite earnings beats, dragging the industrials sector (-1.4%) lower.

The real estate sector (-1.9%) posted the steepest decline as Treasury yields moved higher, adding pressure to rate-sensitive segments.

Smaller-cap stocks followed the broader market lower, with the Russell 2000 (-1.2%) and S&P MidCap 400 (-0.6%) underperforming.

Overall, the session highlighted the market’s fragility near record highs. While investors have largely discounted the geopolitical backdrop in recent weeks, today’s price action suggests that energy volatility remains a critical risk factor. Rising oil prices not only impact sentiment but also pose a direct threat to corporate margins.

As earnings season accelerates, forward guidance will be pivotal. With valuations elevated and macro uncertainty lingering, the sustainability of the current rally will depend less on past results and more on companies’ ability to navigate higher input costs and shifting demand conditions.

Our FTinvest 11 model portfolio declined 1.10% to close at 1,006.13, pulling back after a strong run that pushed the portfolio above the 1,000 level. The drop interrupts the recent upward momentum, though the index remains within range of its all-time high of 1,039.51.

Based on the start-of-year level of 928.18, FTinvest 11 is now up approximately +8.40% year-to-date, maintaining solid gains despite today’s setback. The pullback reflects normal volatility following a sustained rally, while the portfolio’s disciplined, value-driven strategy continues to support its overall performance.