Oil Surges Above $80 as Middle East Tensions Weigh on Stocks; Dow Drops 785 Points
U.S. stocks fell sharply Thursday as oil prices surged past $80 per barrel, raising concerns that escalating conflict in the Middle East could push energy costs higher and reignite inflation pressures.
The $S&P 500(.SPX)$ declined 0.6%, while the $NASDAQ(.IXIC)$ slipped 0.3%. The Dow Jones Industrial Average dropped 785 points, or 1.6%, making it the hardest-hit major index.
Top Stock: $Trade Desk Inc.(TTD)$ (+18.4%). Biggest Decliner: $Ciena(CIEN)$ (-12.9%)
Best Sector: Energy (+0.6%). Worst Sector: Consumer Staples (-2.4%)
Oil Prices Spike After Strait of Hormuz Disruption
Energy markets reacted strongly after Iran effectively shut down the Strait of Hormuz, a narrow maritime passage through which roughly 20% of global oil and gas supply flows.
The disruption followed joint military strikes by the U.S. and Israel inside Iran over the weekend.
Oil
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West Texas Intermediate (WTI) crude jumped 8.5% to $81.01 per barrel, marking its biggest one-day percentage gain since May 2020.
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Brent crude, the global benchmark, climbed 4.9% to $85.41 per barrel.
Earlier in the week, the United States pledged naval protection for tankers traveling through the Persian Gulf, which initially helped calm markets. However, an unconfirmed Iranian state media report of a tanker strike reignited fears of supply disruptions.
If the conflict becomes prolonged, higher oil prices could push both headline and core inflation upward in the coming months.
Why the Dow Fell More Than the S&P 500
The Dow Jones Industrial Average experienced steeper losses compared with broader markets due to its sector composition.
According to market analysts, the Dow has heavier exposure to:
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Industrials
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Healthcare
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Consumer staples
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Financials
These sectors struggled on Thursday, while energy and technology were the only sectors in the S&P 500 to post gains.
Because the Dow has relatively less exposure to technology, it benefited less from the strength in tech stocks during the session.
Software Stocks Stage a Comeback After “SaaSpocalypse”
While energy dominated headlines, another major theme on Wall Street is the rebound in software stocks.
The $iShares Expanded Tech-Software Sector ETF(IGV)$ has surged 10% over the past month, recovering from a steep 12% decline in January.
$IGV
The earlier selloff was triggered by fears that artificial intelligence tools, particularly Claude from Anthropic, could erode market share for traditional software vendors.
However, investor panic has eased as analysts recognize that many enterprise software companies remain deeply integrated into corporate workflows.
According to analysts, companies with strong enterprise ecosystems, such as $Salesforce.com(CRM)$ may actually benefit from the AI boom. Salesforce is already reporting strong demand for its own AI agents integrated into its platform.
Still, the competitive pressure from AI startups remains significant. Combined annual recurring revenue from Anthropic and OpenAI is estimated to exceed $39 billion, and both companies are growing rapidly.
That figure already represents nearly 3% of the $1.43 trillion U.S. software market expected this year, according to forecasts from Gartner.
Key Economic Data Ahead: February Jobs Report
Investors will turn their attention to the upcoming February employment report from the Bureau of Labor Statistics.
Economists expect:
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+60,000 nonfarm payrolls
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Unemployment rate: steady at 4.3%
January saw job growth of 130,000, the strongest increase since December 2024.
The U.S. Census Bureau will also release retail sales data, with economists forecasting flat month-over-month growth.
These reports could help determine whether the U.S. economy remains resilient despite geopolitical tensions and rising energy prices.
Market Outlook
Rising oil prices and geopolitical uncertainty are creating near-term volatility, but investors remain focused on key macro indicators such as employment and inflation.
If energy prices continue to climb, markets could face renewed inflation concerns, potentially complicating the Federal Reserve’s path toward future rate cuts.
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