Stocks Slide as Oil Surges Above $90 and U.S.-Iran Conflict Escalates

The major averages finished broadly lower on Tuesday as a sharp surge in crude oil, escalating U.S.-Iran hostilities, and weakness across technology and other growth stocks weighed heavily on investor sentiment. The S&P 500 declined 0.7%, the Nasdaq Composite fell 1.0%, and the Dow Jones Industrial Average lost 0.8%. Smaller stocks fared even worse, with the Russell 2000 down 1.2% and the S&P MidCap 400 lower by 1.1%.

Crude oil was the dominant force behind the session, extending its intraday surge to settle $4.45 higher, or 5.2%, at $90.28 per barrel. Prices had already been sharply higher during the morning before the geopolitical backdrop deteriorated further around midday.

U.S. Central Command confirmed that American forces had begun striking Islamic Revolutionary Guard Corps targets in Iran following recent attempted attacks on commercial shipping in the Strait of Hormuz and on U.S. service members deployed in the region.

President Trump later said on Truth Social that the United States was conducting “large and powerful” strikes against Iranian targets near the Strait of Hormuz in retaliation for Iran’s attack on Jordan. He warned that any Iranian retaliation would be met with strikes at a “much harder and higher level” and suggested that an even larger attack remained possible.

Iran responded with threats of its own. Axios reporter Barak Ravid quoted the IRGC as warning that “a severe punishment awaits the aggressors” and that the United States would regret the latest attacks.

The escalation erased an earlier attempt by the major averages to recover from their opening losses and kept equities under pressure through the afternoon. Rising Treasury yields added another headwind, particularly for technology and other growth-oriented stocks, while increased expectations for a potential rate hike at this month’s FOMC meeting remained an additional source of concern.

Information technology (-1.0%) finished among the weaker sectors as both semiconductor and software stocks came under pressure. The PHLX Semiconductor Index fell 2.1%, while the iShares Expanded Tech-Software Sector ETF dropped 3.5%, with packaged software names among the day’s most notable laggards.

Apple (AAPL 325.13, +8.28, +2.61%) was an important exception to the broader technology weakness. The stock advanced as John Ternus officially took over as CEO, providing some offset to losses elsewhere in the sector.

Several technology companies also faced pronounced selling ahead of earnings reports after the close. Dell (DELL 424.82, -31.18, -6.84%) retreated sharply ahead of its second-quarter results, with expectations elevated following the company’s strong first-quarter performance and outlook. Palo Alto Networks (PANW 362.09, -20.04, -5.24%) also declined substantially ahead of its fiscal fourth-quarter report.

Consumer discretionary (-1.9%) finished at the bottom of the sector standings as oil- and rate-sensitive stocks came under broad pressure. Amazon (AMZN 254.92, -4.85, -1.87%) and Tesla (TSLA 356.09, -11.86, -3.22%) were notable mega-cap laggards, contributing to weakness across the growth trade. The Vanguard Mega Cap Growth ETF declined 1.0%.

Industrials (-1.4%) were another major source of pressure as the surge in crude oil weighed on many economically sensitive companies. Axon Enterprise (AXON 518.30, -48.26, -8.52%) finished as the worst-performing component in the S&P 500.

Materials (-1.4%) and financials (-0.9%) also posted sizable losses, underscoring that Tuesday’s weakness extended well beyond technology. Cyclical stocks broadly joined growth shares in underperforming as investors reacted to the combination of geopolitical risk, higher energy costs, and rising yields.

The other side of the market’s rotation was evident in energy and defensive sectors. Energy gained 1.5% as crude oil pushed above $90 per barrel, while utilities (+0.7%), health care (+0.6%), and consumer staples (+0.2%) also finished higher as investors shifted toward more defensive positioning.

Edison International (EIX 58.79, +4.81, +8.91%) and PG&E (PCG 14.06, +0.78, +5.92%) were notable standouts in utilities. The shares rallied after KCRA News reporter Ashley Zavala reported that the California Assembly would kill a wildfire liability plan that lawmakers and Gov. Newsom had agreed to only days earlier. The proposal had raised concerns for PG&E and Southern California Edison because it would not have allowed the utilities to shift future wildfire costs to insurance.

Meanwhile, Moderna (MRNA 154.27, +13.93, +9.93%) continued its volatile run following the recent surge sparked by positive melanoma-vaccine results.

Tuesday’s session was ultimately dominated by the sharp rise in crude oil and a renewed escalation in the U.S.-Iran conflict. The midday U.S. strikes and subsequent threats from both sides pushed WTI crude above $90 per barrel and intensified the pressure already facing equities from elevated Treasury yields and increasingly hawkish rate expectations.

Energy and defensive sectors benefited from the resulting rotation, but broad weakness across technology, cyclical stocks, and smaller companies left the major averages firmly lower. The decline also marked a difficult start to September, historically one of the weakest months of the year for U.S. equities.

Our FTinvest 11 model portfolio declined 1.07% to close at 997.24, beginning September on a weak note and falling below the 1,000 level for the first time since reclaiming it in early July. The latest decline leaves the portfolio approximately 9.0% below its all-time closing high of 1,096.33, placing it increasingly close to the 10% threshold generally associated with a correction.

FTinvest 11 is now up approximately +7.44% year-to-date. The portfolio has surrendered a significant portion of its summer gains during the recent downturn, with today’s break below 1,000 representing an important psychological milestone after nearly two months above that level. While FTInvest 11 remains positive for 2026 and outside correction territory, the recent weakness reflects a clear deterioration in short-term momentum as the portfolio enters September.