Stocks Slump on Iran War and Credit Woes

The S&P 500 Index ($SPX) (SPY) on Thursday closed down -1.52%, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -1.56%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.73%.  March E-mini S&P futures (ESH26) fell -1.49%, and March E-mini Nasdaq futures (NQH26) fell -1.75%.

Stocks fell sharply on Thursday as a surge in crude oil prices stoked fears that the war against Iran would crimp global fuel supplies and boost inflation.  WTI crude oil prices soared more than +9% on Thursday amid widening disruptions to crude production and transport in the Middle East.

Stocks extended their losses on Thursday, and crude prices added to their gains on comments from Iran’s Supreme Leader Ayatollah Mojtaba Khamenei, who said that Iran’s leverage of closing the Strait of Hormuz should be used, and attacks on Gulf Arab neighbors will continue.  He added that Iran will open unspecified “other fronts” in the war if the US and Israel persist with their attacks.  Also, comments from President Trump gave crude prices a boost when he said that preventing Iran from having nuclear weapons is "of far greater interest and importance" to him than the cost of oil, a sign that the war in the Middle East isn't close to a de-escalation.

Credit concerns weighed on bank stocks and asset managers on Thursday after Morgan Stanley and Cliffwater LLC capped withdrawals from their private credit funds amid investor demand to redeem more than the funds allow. Private credit funds are grappling with a wave of redemption requests amid growing concerns over the quality of their loans.  BlackRock last week decided to limit withdrawals, a move that other asset managers have since followed.

Crude oil prices rallied sharply on Thursday despite the IEA members' decision on Wednesday to release 400 million barrels from emergency oil stockpiles.  The IEA 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.  UK Defense Secretary Healey said Thursday that it is increasingly evident that Iran is laying mines in the Strait of Hormuz, which could keep the strait closed for the foreseeable future.

Iran’s President Masoud Pezeshkian said his country would need “firm international guarantees against future aggression” to accept a ceasefire as well as reparations.  However, comments from President Trump late Wednesday suggest the conflict could continue for weeks when he said that it would be unwise for the US to wind down hostilities too soon.

US economic news on Thursday was mixed for stocks after weekly jobless claims rose less than expected, a sign of labor market strength. Also, Jan housing starts unexpectedly rose to an 11-month high, but Jan building permits fell to a 5-month low.

US weekly initial unemployment claims fell -1,000 to 213,000, showing a stronger labor market than expectations of an increase to 215,000.

US Jan housing starts unexpectedly rose +7.2% m/m to an 11-month high of 1.487 million, stronger than expectations of a decline to 1.341 million. Jan building permits, a proxy for future construction, fell -5.4% m/m to a 5-month low of 1.376 million, weaker than expectations of 1.410 million.

The US Jan trade deficit shrank to -$54.5 billion, narrower than expectations of -$66.0 billion.

Q4 earnings season is nearly over, with more than 98% of the S&P 500 companies having reported earnings results.  Earnings have been a positive factor for stocks, with 74% of the 495 S&P 500 companies that have reported beating expectations.  According to Bloomberg Intelligence, S&P earnings growth is expected to climb by +8.4% in Q4, marking the tenth consecutive quarter of year-over-year growth.  Excluding the Magnificent Seven megacap technology stocks, Q4 earnings are expected to increase by +4.6%.

The markets are discounting a 0% chance for a -25 bp FOMC rate cut at the next policy meeting on March 17-18.

Overseas stock markets settled lower on Thursday.  The Euro Stoxx 50 closed down -0.79%.  China's Shanghai Composite fell from a 1-week high and closed down -0.10%.  Japan's Nikkei Stock 225 closed down -1.04%.

Interest Rates

June 10-year T-notes (ZNM6) on Thursday closed down by -18.5 ticks.  The 10-year T-note yield rose +3.9 bp to 4.269%.  June T-notes fell to a 5-week low on Thursday, and the 10-year T-note yield climbed to a 5-week high of 4.275%.  Thursday’s +9% rally in oil prices raised inflation expectations and undercut T-note prices. Also, concerns that the cost of the ongoing war against Iran will boost the US budget deficit are bearish for T-notes. On the positive side for T-notes on Thursday was strong demand for the Treasury’s $22 billion auction of 30-year T-bonds that had a bid-to-cover ratio of 2.45, above the 10-auction average of 2.39. 

European government bond yields moved higher on Thursday.  The 10-year German bund yield rose to a 2.25-year high of 2.962% and finished up +2.5 bp to 2.957%.  The 10-year UK gilt yield climbed to a 6.25-month high of 4.800% and finished up +8.7 bp to 4.773%.

The European Union's economy chief, Valdis Dombrovskis, said the inflation rate could surpass 3% this year, and GDP in the Eurozone could be as much as -0.4 points lower if the war in the Middle East causes crude oil prices to remain around $100 per barrel and gas prices stay elevated for an extended period.

Swaps are discounting a 3% chance of a -25 bp ECB rate hike at its next policy meeting on March 19.

US Stock Movers

Airline stocks and cruise line operators sold off on Thursday amid a 9% surge in crude oil prices, which are boosting companies’ fuel costs and threatening earnings.  Carnival (CCL) and Southwest Airlines (LUV) closed down more than -7%, and Alaska Air Group (ALK) and Royal Caribbean Cruises (RCL) closed down more than -6%.  Also, United Airlines Holdings (UAL), Norwegian Cruise Line Holdings (NCLH), and American Airlines Group (AAL) closed down more than -4%.  In addition, Delta Airlines (DAL) closed down more than -2%. 

Chip stocks retreated on Thursday, weighing on the broader market.  Intel (INTC) closed down more than -5%, and Lam Research (LRCX), ARM Holdings Plc (ARM), Microchip Technology (MCHP), and Texas Instruments (TXN) closed down more than -4%.  Also, Applied Materials (AMAT), KLA Corp (KLAC), Analog Devices (ADI), Advanced Micro Devices (AMD), Micron Technology (MU), and Marvell Technology (MRVL) closed down more than -3%. 

Credit concerns weighed on bank stocks and asset managers on Thursday after Morgan Stanley and Cliffwater LLC capped withdrawals from their private credit funds amid investor demand to redeem more than the funds allow. Ares Management (ARES) closed down more than -6%, and 

Goldman Sachs (GS) closed down more than -4% to lead losers in the Dow Jones Industrials.  Also, Morgan Stanley (MS), KKR & Co (KKR), and Citigroup (C) closed down more than -3%. 

The Magnificent Seven technology stocks fell on Thursday, pressuring the broader market.  Tesla (TSLA) closed down more than -3%, and Meta Platforms (META) closed down more than -2%.  Also, Alphabet (GOOGL), Apple (AAPL), Amazon.com (AMZN), and Nvidia (NVDA) closed down more than -1%, and Microsoft (MSFT) closed down -0.73%.

Fertilizer stocks rallied on Thursday amid supply disruptions from the closure of the Strait of Hormuz. CF Industries Holdings (CF) closed up more than +13% to lead gainers in the S&P 500.  Also, Intrepid Potash (IPI) closed up more than +10%, and Mosaic (MOS) closed up more than +7%. 

Energy producers and service providers rose on Thursday after crude prices jumped more than +9%. ConocoPhillips (COP), Chevron (CVX), Phillips 66 (PSX), and Valero Energy (VLO) closed up more than -2%.  Also, APA Corp (APA), Devon Energy (DVN), Exxon Mobil (XOM), and Marathon Petroleum (MPC) closed up more than +1%.

Netskope (NTSK) closed down more than -21% after forecasting a Q1 adjusted net loss per share of -6 cents to -7 cents, wider than Q4’s -4 cent EPS loss.

G-III Apparel Group Ltd (GIII) closed down more than -11% after reporting Q4 net sales of $771.5 million, below the consensus of $791.8 million.

UiPath (PATH) closed down more than -7% after reporting Q4 subscription revenue of $251.2 million, below the consensus of $252.1 million.

Dollar General (DG) closed down more than -6% after giving an underwhelming 2027 comparable sales forecast of up +2.2% to +2.7%, the midpoint right on the consensus of +2.45%. 

GlobalFoundries (GFS) closed down more than -5% after a subsidiary of Mubadala Investment Co. was said to sell as much as $852 million of its stake in the stock overnight at $41.60 to $42.60 per share. 

MercadoLibre (MELI) closed down more than -4% after JPMorgan Chase downgraded the stock to neutral from overweight.

LyondellBasell Industries NV (LYB) closed up more than +10% after Citigroup upgraded the stock to buy from neutral with a price target of $76.

Dow Inc. (DOW) closed up more than +9% after Citigroup upgraded the stock to buy from neutral with a price target of $40.

Occidental Petroleum (OXY) closed up more than +5% after Wells Fargo Securities double upgraded the stock to overweight from underweight with a price target of $69. 

Earnings Reports(3/13/2026)

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