The Nasdaq officially has entered correction territory Thursday, tumbling more than 2 percent as the S&P 500 and Dow Jones each dropped over 1 percent.
Investors dumped risk assets amid a thickening “fog of war” in the Middle East, where a month-old U.S.-Israeli campaign against Iran shows no clear path to resolution despite President Donald Trump’s announcement of a 10-day pause in strikes on Iranian energy facilities.
The selling wave marked the steepest one-day loss for the Nasdaq and S&P 500 since January 20. By the close, the Dow had shed 469.38 points, or 1.01 percent, to finish at 45,960.11. The S&P 500 gave up 114.74 points, or 1.74 percent, closing at 6,477.16. The Nasdaq Composite plunged 521.74 points, or 2.38 percent, to 21,408.08 — now 10.7 percent below its October 29 record high.
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Trump’s late-day statement that talks with Tehran were “going very well,” and that attacks on energy plants would halt until April 6 at Iran’s request, helped stock futures trim losses after the bell. But the damage was already baked in. Earlier in the session, the absence of any tangible diplomatic breakthrough, coupled with Tehran’s dismissal of the U.S. proposal as “one-sided and unfair”, sent oil prices rocketing higher. U.S. crude settled up 4.6 percent; Brent jumped 5.7 percent.
The reason is straightforward and ominous: roughly 20 million barrels a day of crude and refined products, about one-fifth of global oil consumption and a quarter of all seaborne trade, normally flow through the narrow Strait of Hormuz. With shipping already disrupted, any prolonged closure or threat of closure turns a regional conflict into a global inflation shock.
Doug Beath, global equity strategist at Wells Fargo Investment Institute, captured the mood perfectly, noting: “The back and forth seems to be happening at a quicker pace. On top of it, we don’t know who Trump is negotiating with. There’s a lot of conflicting signals, and it’s really the fog of war, the uncertainty of all of it that’s driving this.”
With no solution in sight after four weeks of fighting, markets are now openly gearing up for the worst. The OECD warned Thursday that the conflict has already derailed the global economy from a stronger growth track, with near-term risks of sharply higher inflation if Hormuz flows remain throttled. Central banks, already navigating sticky prices, now face a classic policy trap: higher energy costs feeding into broader inflation just as growth momentum fades.
Traders have scrubbed any expectation of Federal Reserve rate cuts this year; two had been priced in before the bombs started falling.
The sell-off carried a familiar post-pandemic flavor but with a sharper geopolitical edge. After three straight years of strong gains, powered largely by the AI-fueled tech rally, a 10-to-20 percent pullback “should not surprise anyone,” said Peter Tuz, president of Chase Investment Counsel.
“We had one last year during the tariff proposals. Bad technical indicators might, however, encourage selling and discourage buying until the situation clears up,” he said.
Most S&P 500 sectors finished in the red. Energy was the clear winner, up 1.6 percent as investors sought shelter in the very commodity that was inflating costs elsewhere. Defensive utilities managed a modest 0.2 percent gain. The heaviest beatings came in communications services, down 3.5 percent, and technology, off 2.7 percent.
Chip stocks led the tech rout. The Philadelphia Semiconductor Index cratered 4.8 percent after three days of tentative gains. Nvidia, the face of the artificial-intelligence boom, fell more than 4 percent as higher energy prices threaten the power-hungry data centers that train the next generation of models. Communications services took a separate hit after a Los Angeles jury held Meta and Alphabet’s Google liable in the first wave of lawsuits accusing social-media platforms of harming children. Meta shares closed nearly 8 percent lower; Alphabet lost more than 3 percent.
Gold prices slipped more than 2 percent, dragging down gold-miner stocks such as Sibanye Stillwater and Harmony Gold by over 4 percent each. Even the traditional safe haven felt the pull of fragile hopes that Trump’s pause might stick.
Trading volume stayed light, just 16.5 billion shares across U.S. exchanges versus a recent 20-day average of 20.5 billion, a classic sign of nervous hesitation rather than outright panic. Decliners swamped advancers roughly 3-to-1 on the NYSE and 2.5-to-1 on the Nasdaq.
The broader picture is one of exhausted optimism. What began as a calculated military strike has morphed into an open-ended economic drag. Higher oil not only fans inflation; it squeezes corporate margins, crimps consumer spending, and raises the specter of “demand destruction” in energy-intensive industries.
The VIX, Wall Street’s fear gauge, has remained elevated above 20 since the conflict erupted and spiked as high as 35 in the early days — levels that signal investors are pricing in more volatility ahead, not less.