U.S. stocks fell on Thursday, pulling Wall Street back from record highs, as rising geopolitical tensions and mixed corporate earnings weighed on investor sentiment. Futures tied to the S&P 500 and Nasdaq 100 were down about 0.3% before the open, signaling a pullback after strong rallies. The Dow Jones Industrial Average was down about 0.8% as of midday trading, while the Nasdaq was down more than 1%, reversing its recent record-setting streak.
At the heart of the economic downturn is uncertainty over the Strait of Hormuz and the broader U.S.-Iran standoff. Although President Donald Trump extended the ceasefire earlier this week, talks still have no clear path forward.
Iran has refused to return to the negotiating table while a U.S. naval blockade remains in place, while tensions have increased after oil tankers linked to Iran were reportedly intercepted. Energy markets reacted quickly, with Brent crude jumping above $100 a barrel and continuing to fluctuate on worries about supply disruptions.
Joshua Mahony, chief market analyst at Scope Markets, warned: “From the beginning of military conflict, we now appear to have entered a period where both sides believe they can wage war by cutting off supply routes and causing economic and political damage to their opponents.”
“This has left the world in limbo, with businesses around the world weighing the potential damage every day.”
Rising oil prices have added another layer of worry for investors. Brent crude climbed as high as $105 during the session, reflecting concerns that tanker shipments through the Gulf may remain restricted.
Rising energy costs are already having an impact on industries such as airlines, whose profit margins are sensitive to fuel prices. Uncertainty over shipping routes has heightened concerns about global supply chains and inflation.
Earnings season also played a key role in Thursday’s pullback, with Tesla one of the biggest drags. Despite reporting better-than-expected quarterly results, the stock fell more than 3% as investors focused on growing spending plans.
“You should see a significant increase in capital expenditures, but I think a significant increase in revenue streams going forward is reasonable,” Elon Musk told investors.
Tesla said it plans to spend more than $25 billion by 2026 to expand into artificial intelligence, robotics and autonomous driving technologies.
AJ Bell’s Dan Coatsworth noted: “Elon Musk’s warnings about huge spending on artificial intelligence, self-driving taxis, robots and massive new chip factories do not appear to be unduly disruptive to the market.”
“Many shareholders are involved right now, and Tesla needs to grow in these areas to justify its stock market position, which is inconsistent with its core business as an automaker.”
In addition to Tesla, several major companies have also sent different signals. International Business Machines Corp fell sharply despite beating estimates as concerns grew about artificial intelligence disrupting its software business. Honeywell International Inc also fell, saying conflicts in the Middle East weighed on revenue.
Meanwhile, ServiceNow plunged nearly 18% on concerns about artificial intelligence competition, despite meeting analyst forecasts.
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