Stocks Decline as US-Iran Risks Spur Rally in Oil: Markets Wrap

Heightened geopolitical worries sent stocks lower while extending a surge in oil and keeping a lid on bonds amid perceived inflation risks. Gold topped $5,000, while selling shook alternative asset managers after a private credit fund halted redemptions.

As a sense of caution prevailed, the S&P 500 halted its rebound from a tech-fueled rout. A gauge of chipmakers slipped almost 1%. Walmart Inc. climbed as comparable sales in the US beat expectations, overshadowing a conservative outlook. West Texas Intermediate rose above $66. Treasuries wavered. The dollar advanced against most major currencies.

President Donald Trump said the US has to “make a meaningful deal” with Iran while adding that the next 10 days will tell whether there will be an accord. Iran is a “hot spot” right now even as officials from both sides engage in “good talks,” Trump said. He also noted his son-in-law Jared Kushner will be an “envoy of peace.”

The US military build-up in the region means Iran's window to reach a diplomatic agreement over its atomic activities is at risk of closing, according to the head of the United Nations nuclear watchdog.

Axios reported on Wednesday that a major US military operation in the Middle East could begin soon and that Israel's government is pushing for a scenario targeting regime change in the Islamic Republic. A potential war would put flows at risk from a region that pumps about a third of the world's oil.

The rising risk of an attack in Middle East is impairing risk appetite near-term, according to Thomas Lee at Fundstrat Global Advisors.

“Crude oil prices are rising on the anticipation of possible military action in Iran,” said Louis Navellier at Navellier & Associates. “The US and Iran are expected to meet again, and those negotiations are expected to be closely watched.”

Also sapping risk appetite was news that Blue Owl Capital Inc. will restrict withdrawals from one of its retail-focused private credit funds, reversing a previous plan to resume redemptions this quarter. Its shares tumbled 9%, dragging down industry peers like Apollo Global Management Inc., Ares Management Corp. and TPG Inc.

Almost 350 shares in the S&P 500 fell, with the gauge hovering near 6,865. The yield on 10-year Treasuries was little changed at 4.08%. The dollar rose 0.1%.

Photo Credit: Bloomberg

With Iran's military proxies greatly weakened and the economy in crisis, the country doesn't find itself in a very strong negotiating position, so the markets likely expect a diplomatic resolution, according to Dennis Follmer at Montis Financial.

“Right now, stocks have not priced-in the tensions between the US and Iran and that seems appropriate,” he said.

One of the biggest threats to stocks from the Iran situation would be if they were to shut down the Strait of Hormuz - a key global shipping lane. Follmer bets this is a “low probability risk,” given the amount of US military assets gathering in the region and Iran's economic need to get oil out through the strait.

“Given the likelihood of a diplomatic solution and that the resulting volatility from an actual armed conflict would be fairly contained, we think any portfolio changes are unwarranted,” Follmer noted.

Photo Credit: Bloomberg

Corporate Highlights:

• Amazon.com Inc. has officially dethroned Walmart Inc. as the biggest global company by revenue, a milestone attesting to the massive scale the e-commerce and cloud-computing giant has achieved since its humble beginnings in 1994 as an online bookseller in Jeff Bezos' Seattle-area garage.
• New York Governor Kathy Hochul has pulled a proposal that would have allowed for commercial robotaxi services outside New York City, a blow to Alphabet Inc.'s Waymo as it seeks to aggressively expand its driverless fleet this year.
• AppLovin Corp. is preparing to build a social networking platform after the mobile advertising company's failed bid to buy TikTok's assets outside of China last year.
• Deere & Co., the world's largest farm-machinery maker, boosted its annual profit outlook, anticipating a long-awaited upturn in the agriculture economy.
• DoorDash Inc. gave an outlook for orders in the current quarter that surpassed Wall Street's expectations, a testament to its efforts to expand business beyond restaurant takeout.
• Carvana Co.'s higher-than-expected costs dented its fourth-quarter profit in a sign of growing pains as the company pursues rapid growth.
• Figma Inc., a creative software maker, gave an annual revenue outlook that topped estimates, easing Wall Street anxiety that the business is threatened by the emergence of rival artificial intelligence products.
• Six Flags Entertainment Corp. reported 2025 earnings and revenue that were slightly ahead of analyst estimates as the amusement park operator works to rebound from lackluster attendance.
• EQT Corp. stands to pocket $1 billion in February alone as the natural gas producer reaps the benefits of its fortuitous position ahead of one of the steepest price rallies in the history of the US gas market last month.
• OpenAI is close to finalizing the first phase of a new funding round that is likely to bring in more than $100 billion, according to people familiar with the matter, a record-breaking financing deal that would give the startup additional capital to build out its artificial intelligence tools.
• CME Group Inc. is moving closer to crypto's always-on trading model, saying it will allow futures and options on digital assets to trade 24 hours a day later this year.
• Morgan Stanley chopped pricing in half for clients trading private companies' shares on its newly acquired EquityZen platform, undercutting competitors as it looks to expand in a growing market.
• Bank of America Corp. is broadening the scope of its rewards program to encourage customers to do more business with the company, part of an effort to reach lofty financial targets it promised investors last year.
• Klarna Group Plc posted a pretax loss of $16 million in the fourth quarter, as the firm set aside more money for potentially souring loans compared to a year ago.
• Airbus SE faulted Pratt & Whitney for failing to provide aircraft engines in sufficient quantities, forcing the planemaker to pare back ambitious production goals and creating an open dispute with one of its most important suppliers.
• Air France-KLM reported better-than-expected earnings in the fourth quarter and said it remained upbeat about lucrative North Atlantic routes despite heightened geopolitical tensions.
• Nestlé SA's new chief executive officer shrugged off the biggest infant formula recall in the Swiss foodmaker's history with an upbeat outlook for the year and the planned sale of its remaining ice cream brands.
• Pernod Ricard SA posted disappointing sales in the first half, weighed down by a prolonged slump in demand for spirits in the US and China.
• Renault SA expects profitability to decline this year as the automaker rolls out lower-priced electric models including the Twingo and grapples with rising competition in Europe.
• Samsung Electronics Co. jumped to a record after local media reported that the firm is negotiating a price for its latest artificial intelligence memory chip that's up to 30% higher than the previous generation.
• Chinese tech giant ByteDance Ltd. is hiring in the US for nearly 100 open roles within its artificial intelligence division, an effort to compete with the world's leading US-based AI companies despite years of national security concerns from American lawmakers and regulators.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.2% as of 11:02 a.m. New York time
• The Nasdaq 100 fell 0.2%
• The Dow Jones Industrial Average fell 0.3%
• The Stoxx Europe 600 fell 0.6%
• The MSCI World Index fell 0.2%
• Bloomberg Magnificent 7 Total Return Index rose 0.1%
• Philadelphia Stock Exchange Semiconductor Index fell 0.7%
• IShares Expanded Tech-Software Sector ETF fell 0.6%
• The Russell 2000 Index fell 0.1%
• Walmart rose 1.6%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.2% to $1.1765
• The British pound fell 0.3% to $1.3455
• The Japanese yen fell 0.1% to 154.98 per dollar

Cryptocurrencies

• Bitcoin fell 0.1% to $66,214.88
• Ether fell 1.1% to $1,920.45

Bonds

• The yield on 10-year Treasuries was little changed at 4.08%
• Germany's 10-year yield was little changed at 2.75%
• Britain's 10-year yield was little changed at 4.37%
• The yield on 2-year Treasuries was little changed at 3.47%
• The yield on 30-year Treasuries was little changed at 4.71%

Commodities

• West Texas Intermediate crude rose 2.1% to $66.59 a barrel
• Spot gold rose 0.7% to $5,013.09 an ounce

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