US stocks: Wall Street slumps as Middle East uncertainty spooks investors

Published Fri, Mar 27, 2026 · 06:21 AM

WALL Street’s main indexes fell sharply on Thursday and the Nasdaq confirmed a correction as investors worried about escalation in the US-Israeli war against Iran, which has sent oil prices soaring and exacerbated inflation concerns.

President ​Donald Trump said Iran must make a deal with the US or face a continued onslaught, while warning that taking control of Iran’s oil was an option.

A senior Iranian official told Reuters the US proposal for ending nearly four weeks of fighting is “one-sided and unfair,” while stressing that diplomacy had not ended.

The lack of clear signs of progress sent oil prices soaring, with US crude futures settling up 4.6 per cent compared with a 5.7 per cent advance for Brent futures.

As a result, stock indexes erased gains from Wednesday when investors had been betting on a de-escalation in the war, which has disrupted oil shipments through the Strait of Hormuz.

‘Fog of war’

“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,” said Doug Beath, global equity strategist at Wells Fargo Investment Institute, adding that uncertainty about the war was causing investors to sell equities.

“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.”

According to preliminary data, the S&P 500 lost 114.79 points, or 1.74 per cent, to end at 6,476.89 points, while the Nasdaq Composite lost 513.56 points, or 2.34 per cent, to 21,416.27. The Dow Jones Industrial Average fell 481.68 points, or 1.04 per cent, to 45,955.00.

The technology-heavy Nasdaq closed down more than 10 per cent from its Oct 29 closing record high, confirming it has been in a correction since that date.

Noting that stock markets have generally been weaker on Fridays since the Iran war began a month ago, Peter Tuz, president of Chase Investment Counsel, said the S&P 500 could follow the Nasdaq in confirming a correction.

“After three good years for markets, a selloff of 10 to 20 per cent should not surprise anyone. We had one last year during the tariff proposals. Bad technical indicators might, however, encourage selling and discourage buying until the situation clears up,” Tuz said.

Most of the S&P 500‘s 11 major industry sectors lost ground. Energy was the biggest gainer, while the biggest laggards included communications services and technology.

Meta, Alphabet drop after verdicts

The communications index was under pressure after jurors found Meta and Alphabet’s Google liable in the first two trials from a growing wave of lawsuits accusing social media firms of harming children.

In technology, chip stocks were a big drag with the Philadelphia Semiconductor Index tumbling after three sessions of gains. Leading declines in the Dow were shares of artificial intelligence chip leader Nvidia.

The conflict in the Middle East has knocked the global economy off a stronger growth path, the OECD warned on Thursday, with the near-closure of the Strait of Hormuz threatening to push inflation sharply higher.

With high oil prices fanning inflation fears, central banks are in a tough spot regarding interest rates, with traders no longer pricing in any easing from the US Federal Reserve this year.

Two rate cuts had been expected before the Iran conflict erupted, according to the CME Group’s FedWatch Tool. Earlier, data showed new applications for US unemployment benefits rose slightly last week, suggesting a stable labour market and giving the Fed scope to hold rates steady while monitoring the impact of the Iran war.

US-listed shares of gold miners, including Sibanye Stillwater and Harmony Gold, fell as bullion prices lost ground. REUTERS