Wall Street hit by AI and Iran war jitters as oil tops $100

As per the latest business developments, A surge in oil spurred by the escalating Iran war sent stocks and bonds softer, with Wall Street additionally rattled by renewed concerns over whether massive artificial-intelligence investments will pay off.

Brent crude topped $100 a barrel, stoking inflation fears and driving Treasury yields to their highest marks of the year. The S&P 500 eased 1.4%, with a gauge of megacaps set for their worst day since the April 2025 tariff-fueled meltdown. Despite solid results, Alphabet Inc. sank 6.6% after raising its capital spending forecast. Tesla Inc. tumbled 14% as its earnings declined even after firm electric-vehicle deliveries. The dollar rose.

The resurgence of the US-Iran conflict reveals little sign of easing, with neither Washington nor Iran backing down or saying it’s time for new negotiations.

President Donald Trump threatened to step up attacks on Iran and stated he’ll hold the country responsible for any further strikes by the Yemen-based Houthis on Red Sea ships. Trump told Axios he’s considering a “massive attack” and is “close to making a decision” on it, the news agency noted.

“Escalating Middle East tensions have pushed crude prices elevated, raising concerns that inflation could re-accelerate and delay interest-rate relief, maybe even cause the Fed to hike,” stated Sameer Samana at Wells Fargo Investment Institute. “We think crude prices eventually normalize, but appreciate that things may get worse before they get better.”

Those risks come at a time when traders are looking for evidence that big bets on AI are generating new expansion rather than weighing on earnings. Alongside Alphabet, Meta Platforms Inc., Microsoft Corp. and Amazon.com Inc. telegraphed in April they’d be spending as much as $725 billion this year on AI ambitions.

“It’s still early, and we’ll see more earnings from the hyperscalers the week ahead,” stated Matt Maley at Miller Tabak. “So, we cannot declare that they are seeing the same kind of negative reaction to their earnings notes as the chip stocks, but this action does raise more concerns around this ‘sell the news’ offering.”

Meantime, Maley noted that the geopolitical problems are becoming more significant, and this is not helping the situation for risk assets either.

“The equity market has been able to shake off these elevated yields for quite a few months now,” he stated. “That stated, with them making new highs for the year, it’s something that will likely create at least some headwinds before too long.”

The escalation in the conflict has additionally boosted concerns around elevated interest rates. Just days before the The US central bank’s policy meeting, money markets indicate traders see a roughly 35% chance of a hike at the July gathering, up from around 10% a week ago. An gain is fully priced in by September.

“While we believe there is significant risk of the Fed deciding to hike rates later this year, the pricing for the week ahead’s meeting looks extreme as the Fed likely wants to observe the path of core inflation over the next several months before making a decision on hikes,” stated Gennadiy Goldberg at TD Securities.