Stocks Settle Sharply Lower on Fears Iran War is Escalating

The S&P 500 Index ($SPX) (SPY) on Friday closed down -1.67%, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -1.73%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.93%.  June E-mini S&P futures (ESM26) fell -1.80%, and June E-mini Nasdaq futures (NQM26) fell -2.05%.

Stocks sold off sharply on Friday, with the S&P 500 posting a 7-month low and the Nasdaq 100 and the Dow Jones Industrials posting 6.75-month lows. Stocks retreated on Friday amid concerns that a protracted war in Iran will keep oil prices elevated and fuel both inflation and a slowdown in economic growth.  WTI crude oil prices surged by more than 5% on Friday, and global bond yields soared amid the risk of a protracted Iran war. 

Global bond yields jumped on Friday, weighing on stocks amid concern that a protracted war in Iran will keep energy prices high and fuel inflation. The 10-year T-note yield rose to an 8.25-month high Friday at 4.48%, the 10-year German Bund yield climbed to a 14.75-year high of 3.13%, and the 10-year Japan JGB bond yield rose to a 27-year high of 2.39%. 

The US and Israel bombed several nuclear sites and steel facilities in Iran on Friday, as Iran targeted several Gulf states as the war entered its 27th day.  Saudi Arabia said it intercepted two ballistic missiles headed for Riyadh, and Kuwait said drones damaged the port of Shuwaikh, while another port called Mubarek Al Kabeer was also targeted.  Meanwhile, the Wall Street Journal reported the Pentagon is considering sending as many as 10,000 additional troops to the Middle East, on top of the 5,000 troops of two Marine Expeditionary Units already sent.

The University of Michigan US Mar consumer sentiment index was revised lower to 53.3 from the previously reported 55.5, weaker than expectations of 54.0.

The University of Michigan US Mar 1-year inflation expectations were revised upward to 3.8% from 3.4%, stronger than expectations of 3.6%. The Mar 5-10 year inflation expectations were unrevised at 3.2%, lower than expectations of an increase to 3.5%.

Market sentiment also took a hit today when China launched a pair of investigations into US trade practices, retaliating against similar probes by the Trump administration earlier this month, when the US said it was investigating China under Section 301 of the Trade Act for alleged excess manufacturing capacity.  China's Ministry of Commerce said its probes target US practices that disrupt global supply chains, covering restrictions on Chinese goods entering US markets, export controls on advanced technology, and limits on bilateral investment in critical sectors.  The other action focuses on US barriers to trade in green products, including restrictions on the export of Chinese renewable energy goods to the US and limits on cooperation in green technology.

Stock index futures initially moved higher in overnight trade after President Trump late Thursday extended his deadline for Iran to strike a deal with the US by 10 days to April 6, saying talks with the country were going "very well."

There are concerns that the Iran war could escalate throughout the Middle East.  Saudi Arabia agreed to give the US military access to King Fahd Air Base, and the UAE closed an Iranian-owned hospital and club.  Iran’s Middle Eastern neighbors are growing frustrated with Iran, which has responded to US and Israeli attacks by hitting targets in several nearby nations.  

Crude oil prices (CLK26) remain high despite attempts to boost global supplies.  The IEA on March 11 released 400 million barrels from emergency oil stockpiles and said the war against Iran is disrupting 7.5% of global oil supply, and the conflict will cut global oil supply by 8 million bpd this month.  The closure of the Strait of Hormuz, through which about a fifth of the world’s oil and natural gas flows, has choked off oil and gas flows due to Iran’s attacks on shipping in the waterway and forced Gulf producers to cut output because they can’t export from the region.  Iran is also seeking to control ship transit through the Strait of Hormuz, asking vessels to provide lists of crew and cargo, along with voyage details and bills of lading if they want to travel through the waterway.  Goldman Sachs warns that crude prices could exceed the 2008 record high of close to $150 a barrel if flows through the Strait of Hormuz remain depressed through March.

The International Energy Agency said Monday that more than 40 energy sites across nine countries in the Middle East have been "severely or very severely" damaged, potentially prolonging disruptions to global supply chains once the war in Iran ends. 

The markets are discounting a 4% chance for a +25 bp FOMC rate hike at the April 28-29 policy meeting.

Overseas stock markets settled mixed on Friday.  The Euro Stoxx 50 closed down -1.08%.  China's Shanghai Composite closed up +0.63%.  Japan's Nikkei Stock 225 closed down -0.43%.

Interest Rates

June 10-year T-notes (ZNM6) on Friday closed down by -0.5 of a tick.  The 10-year T-note yield rose +2.8 bp to 4.440%.  June T-notes tumbled to a 10-month nearest-futures low on Friday, and the 10-year T-note yield rose to an 8.25-month high of 4.482%.  T-notes were under pressure Friday amid a +5% surge in WTI crude oil prices, which boosts inflation expectations.  There are also concerns that damage to energy infrastructure from the Iran war will keep energy prices higher for longer and force the Fed to tighten monetary policy.  T-notes recovered from their worst level after the University of Michigan US Mar consumer sentiment index was revised lower than expected and after stocks sold off, sparking some safe-haven demand for T-notes. 

European government bond yields moved higher on Friday.  The 10-year German bund yield jumped to a 14.75-year high of 3.129% and finished up +2.1 bp to 3.094%.  The 10-year UK gilt yield was unchanged at 4.974%.

ECB Feb 1-year CPI expectations unexpectedly eased to a 16-month low of 2.5% from 2.6% in Jan, weaker than expectations of an increase to 2.8%.  ECB Feb 3-year CPI expectations unexpectedly eased to 2.5% from 2.6% in Jan, weaker than expectations of an increase to 2.7%.

ECB Governing Council member Pierre Wunsch said, "an ECB rate hike in April is not out of the question" if there is solid evidence that the Iran war will be lasting and lead to higher inflation.

ECB Executive Board member Isabel Schnabel said the ECB shouldn't rush its response to the Iran war and must be careful not to "overreact."

UK Feb retail sales ex-auto fuel fell -0.4% m/m, a smaller decline than expectations of -1.0% m/m.

Swaps are discounting a 52% chance of a +25 bp ECB rate hike at its next policy meeting on April 30.

US Stock Movers

Software stocks sold off on Friday, weighing on the broader market.  Datadog (DDOG) closed down more than -8% to lead losers in the S&P 500 and Nasdaq 100. Also, Atlassian (TEAM) and Autodesk (ADSK) closed down more than -4%, and Intuit (INTU), Salesforce (CRM), ServiceNow (NOW), and Workday (WDAY) closed down more than -3%.  In addition, Oracle (ORCL) and Adobe (ADBE) closed down more than -2%. 

Cybersecurity stocks retreated on Friday after a report from Fortune said Anthropic is testing a new AI model that “poses significant cybersecurity risks.”  Okta (OKTA) closed down more than -7%, and CrowdStrike Holdings (CRWD), Palo Alto Networks (PANW), and Zscaler (ZS) closed down more than -5%.  Also, Cloudflare (NET) and Fortinet (FTNT) closed down more than -3%.

The Magnificent Seven technology stocks moved lower on Friday, weighing on the overall market.  Amazon.com (AMZN) and Meta Platforms (META) closed down more than -3%.  Also, Nvidia (NVDA), Tesla (TSLA), Microsoft (MSFT), and Alphabet (GOOGL) closed down more than -2%.  In addition, Apple (AAPL) closed down more than -1%.

Cryptocurrency-exposed stocks fell on Friday as Bitcoin (^BTCUSD) dropped more than -4% to a 3.5-week low.  Riot Platforms (RIOT) and Galaxy Digital Holdings (GLXY) closed down more than -8%, and Coinbase Global (COIN) and MARA Holdings (MARA) closed down more than -6%.  Also, Strategy (MSTR) closed down more than -5%. 

Energy producers and energy service providers moved higher on Friday as WTI crude oil prices jumped more than +5%.  Halliburton (HAL) closed up more than +4%, and APA Corp (APA) and Exxon Mobil (XOM) closed up more than +3%.  Also, Phillips 66 (PSX), SLB Ltd (SLB), and Valero Energy (VLO) closed up more than +2%, and Baker Hughes (BKR), Devon Energy (DVN), Occidental Petroleum (OXY), and Marathon Petroleum (MPC) closed up more than +1%.  In addition,Chevron (CVX) closed up more than +1% to lead gainers in the Dow Jones Industrials. 

Wix.com Ltd (WIX) closed down more than -2% after JPMorgan Chase downgraded the stock to underweight from neutral.

Two Harbors Investment Co (TWO) closed down more than -1% after Compass Point Research & Trading LLC downgraded the stock to neutral from buy. 

Argan Inc. (AGX) closed up more than +38% after reporting Q4 diluted adjusted EPS of $3.47, well above the consensus of $1.98. 

Unity Software (U) closed up more than +13% after reporting preliminary Q1 earnings that showed significant strength in Vector, the company’s AI-driven advertising unit. 

Entergy (ETR) closed up more than +6% to lead gainers in the S&P 500 after signing a pact with Meta Platforms to supply 5.2 gigawatts of electricity to one of its data centers. 

Venture Global (VG) closed up more than +4% after settling pending arbitration with Edison Investment Research concerning the Calcasieu Pass project.

Legence Corp (LGN) closed up more than +3% after reporting Q4 revenue of $738 million, well above the consensus of $621 million, and forecasting full-year revenue of $3.7 billion to $3.9 billion, stronger than the consensus of $3.48 billion.

Primo Brands (PRMB) closed up more than +2% after Jeffries upgraded the stock to buy from hold with a price target of $25.

Earnings Reports(3/30/2026)

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