Markets Sink as Middle East Tensions and Iran Fears Rattle Investors

U.S. stocks closed sharply lower on Thursday as a cascade of geopolitical flashpoints — escalating Middle East hostilities, unresolved U.S.-Iran war powers, and fresh trade friction between Washington and its allies — drove investors into risk-off mode and hammered equity markets across the board.

Crude oil was among the session's biggest movers, with futures settling at $92.19, a gain of more than 6% on the day, as Iran's increasing hostilities stoked fears of supply disruptions. President Trump added to market unease by signaling he was considering what he described as a massive military response, while the U.S. Senate moved to block a resolution that would have curbed his war powers against Iran.

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On the trade front, multiple fault lines widened simultaneously. Canadian Prime Minister Mark Carney vowed to defend the country's interests in its ongoing dispute with Washington, even as his government said it remained focused on securing a comprehensive USMCA agreement. Separately, an EU fine against Google threatened to further inflame already strained U.S.-Europe trade relations.

Economic data offered a mixed backdrop. Weekly U.S. jobless claims came in at a surprisingly low 187,000 — well beneath the 212,000 consensus estimate — suggesting a still-resilient labor market even as 30-year mortgage rates climbed to their highest level since August 2025. The European Central Bank, meanwhile, held its deposit rate steady at 2.25% as widely anticipated, with ECB President Christine Lagarde noting modest improvements in eurozone economic activity. The Federal Reserve's next meeting is drawing heightened scrutiny, with the Wall Street Journal's Nick Timiraos describing it as one of the most unpredictable gatherings in recent memory.

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