Stocks Hit by AI and War Jitters as Oil Tops $100: Markets Wrap
(Bloomberg) — A surge in oil spurred by the escalating Iran war sent stocks and bonds lower, with Wall Street also rattled by renewed concerns over whether massive artificial-intelligence investments will pay off.
Brent crude topped $100 a barrel, stoking inflation fears and driving Treasury yields to their highest levels of the year. The S&P 500 dropped 1.4%, with a gauge of megacaps set for their worst day since the April 2025 tariff-fueled meltdown. Despite solid results, Alphabet Inc. sank 6.8% after raising its capital spending forecast. Tesla Inc. tumbled 14% as its profit fell even after strong electric-vehicle deliveries. The dollar rose.
The resurgence of the US-Iran conflict shows little sign of easing, with neither Washington nor Iran backing down or saying it’s time for new negotiations.
President Donald Trump threatened to step up attacks on Iran and said he’ll hold the country responsible for any further strikes by the Yemen-based Houthis on Red Sea ships. Trump told Axios he’s considering a “massive attack” and is “close to making a decision” on it, the news agency reported.
“Escalating Middle East tensions have pushed crude prices higher, raising concerns that inflation could re-accelerate and delay interest-rate relief, maybe even cause the Fed to hike,” said Sameer Samana at Wells Fargo Investment Institute. “We think oil prices eventually normalize, but appreciate that things may get worse before they get better.”
Those risks come at a time when traders are looking for evidence that big bets on AI are generating new growth rather than weighing on profits. Alongside Alphabet, Meta Platforms Inc., Microsoft Corp. and Amazon.com Inc. telegraphed in April they’d be spending as much as $725 billion this year on AI ambitions.
“It’s still early, and we’ll see more earnings from the hyperscalers next week,” said Matt Maley at Miller Tabak. “So, we cannot declare that they are seeing the same kind of negative reaction to their earnings reports as the chip stocks, but this action does raise more concerns about this ‘sell the news’ issue.”
Meantime, Maley noted that the geopolitical problems are becoming more significant, and this is not helping the situation for risk assets either.
“The stock market has been able to shake off these higher yields for quite a few months now,” he said. “However, with them making new highs for the year, it’s something that will likely create at least some headwinds before too long.”
The escalation in the conflict has also raised concerns about higher borrowing costs. Just days before the Federal Reserve meeting, money markets show traders see a roughly 35% chance of a rate hike, up from about 10% a week ago. An increase is fully priced in by September.
“While we believe there is significant risk of the Fed deciding to hike rates later this year, the pricing for next week’s meeting looks extreme as the Fed likely wants to observe the path of core inflation over the next several months before making a decision on hikes,” said Gennadiy Goldberg at TD Securities.
Corporate Highlights:
Advanced Micro Devices Inc. announced a raft of new products for data centers that it said will outperform those from rival Nvidia Corp., aiming to make gains in a booming market for AI computing. International Business Machines Corp. cut its full-year sales outlook, including for its closely watched software unit, after reporting a dip in demand for its mainframe business. Texas Instruments Inc., the biggest maker of analog and embedded processing chips, gave a sales forecast that topped estimates but failed to excite investors, who had bid up the company’s shares this year. American Airlines Group Inc. cut its 2026 earnings guidance for the second time in three months amid high fuel prices because of the war in Iran, holding back the carrier’s efforts to narrow the performance gap with its larger two rivals. Lockheed Martin Corp. and RTX Corp. raised their full-year sales forecasts as geopolitical tensions around the world boost defense spending. What Bloomberg Strategists say…
“Alphabet’s latest capex hike, coupled with soaring future spending commitments, has rattled investors, especially with other tech giants due to report next week and facing the risk of a similar investor backlash.”
—Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 fell 1.4% as of 3 p.m. New York time The Nasdaq 100 fell 2.2% The Dow Jones Industrial Average fell 1.1% The MSCI World Index fell 1.3% Currencies
The Bloomberg Dollar Spot Index rose 0.3% The euro fell 0.3% to $1.1376 The British pound fell 0.4% to $1.3316 The Japanese yen fell 0.4% to 163.80 per dollar Cryptocurrencies
Bitcoin fell 1.6% to $64,850.78 Ether fell 2.4% to $1,880.56 Bonds
The yield on 10-year Treasuries advanced five basis points to 4.70% Germany’s 10-year yield advanced three basis points to 3.20% Britain’s 10-year yield advanced seven basis points to 5.10% Commodities
West Texas Intermediate crude rose 6.1% to $92.16 a barrel Spot gold fell 2% to $4,046.51 an ounce ©2026 Bloomberg L.P.
