On Friday, stocks took a hit as oil prices surged to their highest in five months, amidst concerns of rising tensions in the Middle East and the possibility that tech companies may be overspending on AI initiatives.
The Dow Jones Industrial Average dropped by 702 points, or around 1.3%, by about 10:40 a.m. ET, while the S&P 500 saw a decline of 0.4%.
The Nasdaq remained relatively stable after experiencing its steepest decline since June the day before.
Brent crude futures increased by 2.7%, reaching $116.24 a barrel, marking their highest price since early May, and it’s projected to show a weekly increase exceeding 10%.
Similarly, West Texas Intermediate crude rose by 2.9% to hit $102.40 a barrel. According to AAA, the national average price for gasoline has reached $4.29 a gallon.
Fears of renewed conflict in the Middle East surfaced following reports that the U.S. has prepared plans for additional strikes after the upcoming midterm elections and has instructed non-essential personnel and their families to evacuate from Saudi Arabia.
On Thursday, President Trump accused Iran of fabricating claims regarding attacks on ships in the Strait of Hormuz, alleging that the nation is attempting to inflate oil prices ahead of the U.S. elections.
In a social media post, he stated, “They are even making up fake hits, mines, and everything else, because more oil is coming through the Hormuz Strait now than it did even prior to the beginning of the conflict.”
Meanwhile, Iran’s military claimed that four vessels were hit and caught fire in the Gulf, and three others reportedly struck mines in the strait, as per a state-backed news outlet.
Iran’s army chief has also indicated that the military is fully prepared for “asymmetric warfare,” bolstering its capabilities after reports suggested that U.S. and Israeli officials are contemplating a brief, but intense, operation in Iran following the elections.
At the same time, investors are grappling with ongoing uncertainty in the tech sector, following significant spending announcements from major corporations, compounded by persistently high interest rates.
Shares of CoreWeave, a notable AI cloud service that leases computing power, saw a decrease of 0.9% on Friday after plummeting over 10% the previous day.
This so-called “neocloud” sector seems to serve as a barometer for tech companies making substantial investments now, banking on future AI-related earnings.
However, some chip stocks managed slight rebounds by Friday morning, with AMD, Micron, and Nvidia seeing increases of 1.9%, 3.5%, and 0.5%, respectively.
In the bond market, the yield on the U.S. 10-year Treasury rose slightly to 4.994%, while the 30-year yield increased to 5.317%, following sharp declines in long-term yields observed on Thursday.
