Stocks Sink, Oil Jumps as Mideast Tensions Build: Markets Wrap

This content was published on June 13, 2025 - 22:33

7 minutes

(Bloomberg) — Wall Street buckled as reports of Iran’s retaliation for Israel’s attack on its nuclear facilities deepened concerns that the conflict is escalating, with oil jumping and stocks taking a hit.

The S&P 500 lost over 1%, wiping out this week’s advance. Airline and travel companies tumbled, while energy producers and defense shares rose. West Texas Intermediate crude futures surged more than 7%, the most since March 2022. Gold hovered near its all-time high. Treasuries fell as a surge in oil stoked concern about a resurgence in inflation. The dollar edged up.

Subscribe to the Stock Movers Podcast on Apple, Spotify and other Podcast Platforms.

Iran fired hundreds of missiles in retaliation for Israel’s airstrikes that targeted Tehran’s military and nuclear facilities, broadening a conflict that threatens to engulf the region. The attack is the most forceful step yet by Tehran since Israel’s overnight raids killed top Iranian generals and badly damaged key military infrastructure.

“The lasting damage may be crude oil prices,” said Louis Navellier, chief investment officer at Navellier & Associates. “This will certainly do some damage to the inflation statistics if it doesn’t roll back soon.”

The timing of the strike undercuts a risk-on week in which a key measure of inflation came lower than expected while the US and China made progress on trade talks. The surge in oil raises fresh questions about supply-side price pressures, potentially complicating the Federal Reserve’s rate path.

President Donald Trump urged Iran to accept a nuclear deal with Washington to avoid further attacks, which Prime Minister Benjamin Netanyahu vowed would probably happen over the coming days as Israel looks to deal a severe blow to Tehran’s nuclear program.

“The wild card is oil; a sustained increase in oil prices – particularly against the existing backdrop of uncertainty – could become an additional hurdle for the economy to overcome,” said Jim Baird at Plante Moran Financial Advisors. “The events of the past day increase that risk, but a sustained increase in oil prices still doesn’t look like the base-case scenario.”

Baird says it’s possible that oil prices could recede if conditions don’t escalate considerably in the coming days and if the conflict is largely contained between Israel and Iran. Conversely, if the conflict were to expand, the risk of a more sustained increase in oil prices – and a more notable impact on an already slowing global economy – would rise, he noted.

Ahead of the latest escalation in geopolitical tensions, traders had boosted their bets on Fed rate cuts. While those wagers receded slightly on Friday, money markets are still projecting two quarter-point reductions before the end of the year.

While Fed officials are widely expected to keep their benchmark rates on hold at next week’s policy meeting, they are set to release a quarterly update of economic and rate projections, known as the dot plot. In March, they had outlined two cuts for this year.

At NatAlliance Securities, Andrew Brenner remarks that bond and stock markets will be closed the day after the Fed meeting due to a holiday. And with Middle East fears, it should be a “tricky” week, he said.

Strategists at Barclays Plc recommended clients position for a “hawkish Fed surprise” next week as they expect officials to raise their inflation forecast for 2025 and pare back the number of cuts expected to “less than what the current modal pricing is.”

“The most-interesting reaction in markets today isn’t in stocks, oil, or the US dollar,” said Scott Ladner at Horizon Investments. “Those are all doing what you’d probably expect on day-zero of a risk-off event. The interesting reaction is in US Treasuries, which are acting more like bitcoin than a ‘safety trade’.”

Ladner says only about half the rise in yields can be attributed to higher inflation expectations today due to oil.

“The rest is a bit troubling, particularly for those who thought stock/bond correlations were their friend again finally,” he noted.

Meantime, Wall Street’s so-called fear gauge — the VIX — topped 20. A break of that level is often seen as a dividing line between calm and nervousness in markets.

Before tensions in the Middle East had ratcheted up, US stock funds suffered the biggest outflows in almost three months, according to data published by Bank of America Corp.

About $9.8 billion was redeemed from US stocks in the week through Wednesday, the most in 11 weeks, according to EPFR Global data cited by the bank. Even European funds, which have been popular with investors this year, suffered their first outflows in nine weeks at $600 million.

Corporate Highlights:

The Trump administration is taking steps that would make it easier for automakers to deploy-self driving cars without driver controls, a potential boon to the ambitions of Tesla Inc. and rivals looking to put robotaxis on US roads in the near future.
Boeing Co. delivered its first aircraft to a Chinese airline customer since President Donald Trump unleashed a wave of tariffs in early April, a sign of rapprochement as Washington and Beijing look to ease tensions.
Adobe Inc. sank after the creative-software company gave a sales outlook for the current quarter that failed to calm investors who have been skeptical it can hold its own against AI-focused upstarts.
Amazon.com Inc. and Walmart Inc. are among large multinational companies which have recently discussed issuing their own stablecoins in the US, the Wall Street Journal reported, citing unidentified people.
Visa Inc. and Mastercard Inc. fell. Any moves by global retailers to set up their own blockchain-based payment rails could hit credit card issuers’ revenues.

Some of the main moves in markets:

Stocks