Wall Street turns defensive as Iran tensions drive oil above $93
Escalating US-Iran military strikes pushed oil prices to a six-week high, prompting a defensive shift in equities ahead of crucial AI earnings from Alphabet and Tesla.
US equities diverged sharply on Wednesday as a sudden surge in crude oil prices triggered a defensive shift among investors. The Nasdaq Composite dropped 65.06 points, or 0.25%, to 25,772.14 by late morning, recovering slightly from a steeper 0.56% loss at the opening bell. The S&P 500 was virtually flat, edging up just 2.28 points to 7,511.48, while the Dow Jones Industrial Average bucked the trend to gain 238.09 points, or 0.46%, reaching 52,462.73.
The market mood shifted after the US military reportedly struck Iran's Larak Island near the Strait of Hormuz, stoking fears of major energy supply disruptions. Brent crude surged 3.1% to $93.83 a barrel, briefly crossing the $95 threshold to hit its highest level in almost six weeks. "Festering concerns that the US-Iran standoff is at risk of heating up further, as opposed to cooling off appreciably soon, are behind the spike in oil prices," said Briefing.com analyst Patrick O'Hare.
O'Hare noted the oil spike was directly driving a "defensive-minded turn" in equities as participants priced in potential inflationary pressures. The 10-year Treasury yield climbed to 4.65% from 4.63% on Tuesday, reflecting underlying jitters in the fixed-income market. In Washington, Defense Secretary Pete Hegseth faced congressional questions regarding an administration request for tens of billions of dollars in additional funding tied to the conflict.
The flight to safety extended across the precious metals complex as the geopolitical risk premium widened. Spot gold climbed 1.3% to $4,130.59 an ounce, while US gold futures for August delivery rose 1.5% to $4,135.40. Spot silver added 1.1% to $59.40, platinum gained 1.1% to $1,647.17, and palladium advanced 2.9% to $1,319.74.
The geopolitical noise threatened to overshadow standalone corporate milestones, including a 22.4% rally in Super Micro Computer. The AI server manufacturer soared after revealing it had secured more than $60 billion in new orders for the fourth quarter, a strong signal of continued infrastructure demand. However, the broader market remains fixated on Alphabet and Tesla, the first of the "Magnificent Seven" technology giants to post second-quarter earnings after the closing bell. The central question for investors is whether these companies can finally prove that their enormous capital expenditures on artificial intelligence are yielding meaningful financial returns.
