US Stocks Hit Six-Month Low as War Fears and Rising Oil Prices Rattle Markets

The Nasdaq 100 plunged nearly 2% last Friday, closing at its lowest mark since September 2025. The selloff was driven by mounting worries about a prolonged Middle East conflict and surging oil prices, sparking a broad retreat across US equities.

Tech Stocks Bear the Brunt

The sharp drop in the Nasdaq 100 erased weeks of gains, with the index falling 1.9% to close around 23,789. Heavyweights Nvidia and Micron Technology led the decline, each losing over 4%. Nvidia alone accounts for about 12% of the Nasdaq 100’s weighting, amplifying the index’s slide.

The Philadelphia Semiconductor Index sank 3.2%, signaling deep pressure on chipmakers. These stocks have been particularly sensitive to fears that a prolonged war could disrupt global supply chains, especially for critical components. Semiconductor companies rely heavily on smooth logistics and stable manufacturing hubs, both threatened by rising geopolitical tensions.

Consumer internet and software companies showed more resilience, tempering the overall Nasdaq drop to under 2%. Still, the selling was broad enough to push the index below key technical support at 24,000, a psychological barrier watched closely by futures traders.

Broader Market Declines and Small Caps Enter Correction

The S&P 500 also fell 1.5%, while the Russell 2000 small-cap index dropped 2%, officially entering correction territory after losing more than 10% since January.

This signals a growing risk-off mood among investors, who are pulling back from equities amid increasing uncertainties.

Rising oil prices added fuel to the fire. Brent crude surged past $112 a barrel, stoking fears of renewed inflation and stagflation. Energy costs often ripple through corporate earnings and consumer spending, making investors wary of the economic outlook.

Geopolitical Tensions Drive Sentiment Shift

Investor anxiety centers on the escalating war in the Middle East. Initial hopes for a quick resolution have faded as peace talks stall and military actions intensify. President Donald Trump dismissed chances of an immediate ceasefire with Iran, fueling speculation of a prolonged conflict that could last months or longer.

Reports of potential US ground troop deployments have further unsettled markets. The possibility of an extended war raises concerns about deeper supply chain disruptions, rising costs, and structural economic challenges. Wells Fargo’s Ohsung Kwon summed it up: the market is growing increasingly nervous about the long-term fallout.

Volatility and Risk-Off Moves

Volatility spiked last week, with the VIX index climbing near 27. The market also faced a "triple witching" options expiration, amplifying swings and adding to uncertainty. Investors sought safety in gold, which rallied amid the turmoil, while risk assets like Bitcoin saw sharp pullbacks.

Bitcoin fell about 7% over two days, dropping below $68,000 after failing to hold above $74,000. The cryptocurrency’s slide mirrored broader risk-off sentiment as investors moved away from risky assets amid weak US economic data and geopolitical concerns.

Retail investors showed signs of unease too. BlackRock and Blackstone experienced spikes in redemptions from private credit funds, signaling nervousness outside traditional equity markets.

Economic Data Adds to Unease

US retail sales declined 0.2% in January, and the economy lost 92,000 jobs in February. These figures suggest a cooling labor market, but investors doubt the Federal Reserve will ease interest rates soon. Treasury markets price in a 78% chance that rates will stay steady near 3.5% to 3.75% through April.

Higher energy prices make the inflation outlook, as increased costs can keep price pressures elevated. The Fed faces a tricky balancing act: stimulus could spark inflation, but tighter policy risks slowing growth further.

Supply Chain Strains and Corporate Challenges

Beyond chips, the conflict threatens logistics on a larger scale. Shipping giant Maersk halted two key routes linking the Middle East with Asia and Europe. Disruptions like these could raise costs across industries, squeezing profit margins and slowing global trade.

Meanwhile, fears of corporate layoffs tied to artificial intelligence automation add another layer of uncertainty. Kansas City Fed President Jeff Schmid noted AI is replacing manual jobs, coinciding with demographic shifts like retiring older workers. This structural change in the labor market could reshape economic dynamics in unexpected ways.

US markets face a volatile stretch ahead as geopolitical risks collide with economic headwinds. How investors and companies adapt to these challenges will shape the direction of stocks and the broader economy over the next few months.