Escalating conflict between Israel and Iran sent the stock market falling on Friday.
The Dow Jones Industrial Average dropped 770 points, or 1.8%. The S&P 500 fell 1.1%. The Nasdaq Composite was off 1.3%.
After Israel launched attacks on Iran’s nuclear infrastructure and Iranian personnel, Iran retaliated by firing missiles at Israel later in the trading session.
Secretary of State Marco Rubio said the U.S. was not involved in Israel’s strikes, but President Donald Trump said Iran should have made a deal with the U.S. in the 60-day span he offered.
“Today is day 61. I told them what to do, but they just couldn’t get there. Now they have, perhaps, a second chance!” Trump said on Truth Social.
Crude oil futures spiked 7.3% to $72.98 a barrel. The S&P 500’s energy sector also rallied while the rest of the index struggled.
Wall Street will be paying close attention to the conflict over the weekend. When traders return, they’ll also have to gear up for Wednesday’s interest-rate decision from the Federal Reserve.
“The Federal Reserve has relied on mixed data and intense policy uncertainty to rationalize a wait and see approach,” Dave Donabedian, co-chief investment officer of CIBC Private Wealth, told Barron’s. “It has worked so far. The Israel-Iran turmoil adds more uncertainty, and another reason for the Fed to continue their ‘don’t just do something, stand there’ approach.”
Donabedian adds that though recent inflation data has been encouraging, Federal Reserve Chair Jerome Powell has mentioned the risk tariffs could boost prices later in the year.
“The rebound in consumer confidence is encouraging, yet there are cracks developing in the job market,” Donabedian says. “Again, mixed signals, so the FOMC will monitor rather than act. We do expect a couple of rate cuts later in the year driven by increasing concern about employment. However, we’re not there yet.”
