U.S. equities suffered a broad selloff on Thursday, with the Dow Jones Industrial Average tumbling 604 points (1.2%) as a surge in oil prices and disappointing reactions to earnings from two mega-cap technology stocks rattled investor sentiment. The S&P 500 fell 1.2%, while the tech-heavy Nasdaq Composite underperformed with a 1.8% decline.
Oil Surge Revives Inflation Fears
Crude oil prices jumped after Yemen's Iran-backed Houthi group claimed responsibility for attacks on two Saudi Arabian oil tankers in the Red Sea, stoking concerns that the Middle East conflict could widen. President Donald Trump further escalated tensions by warning of military action against Iranian infrastructure, stating on Truth Social that any attack on a ship in the Strait of Hormuz would prompt the U.S. to bomb Iranian bridges or power plants.
Brent crude futures for July delivery rose 6% to trade above $99 a barrel, briefly touching $100 during the session. West Texas Intermediate crude climbed 5% to over $91 a barrel. Both benchmarks reached their highest levels since before the U.S.-Iran agreement last month. The oil spike pushed Treasury yields higher, with the benchmark 10-year yield hitting its highest since January 2025.
“Inflation has remained top of the agenda for markets this morning, with Brent crude moving up as the Middle East escalation continues,” Deutsche Bank strategist Jim Reid noted.
Alphabet and Tesla Weigh on Tech
Technology stocks came under heavy pressure after quarterly updates from two industry giants. Alphabet shares slid about 5% after the Google parent raised its 2026 capital expenditure forecast to as much as $205 billion, citing continued demand for AI infrastructure. The higher spending outlook added to investor caution over the scale of AI-related investments by major cloud companies. For more details, see our coverage on Alphabet Stock Slides as $205B Capex Plan and Negative FCF Overshadow Cloud Surge.
Tesla shares dropped more than 9% after the electric vehicle maker reported second-quarter earnings that missed Wall Street expectations, with operating expenses growing faster than revenue. The broader tech selloff also dragged down other names, as seen in Dow Futures Drop 154 Points as Big Tech Earnings and Oil Surge Rattle Markets.
Jobless Claims Signal Resilient Labor Market
Economic data released Thursday pointed to continued strength in the U.S. labor market. Initial jobless claims fell to 187,000 in the week ended July 18, down from 209,000 the prior week and marking the lowest level since 1969. The stronger-than-expected reading reinforced expectations of economic expansion but also raised concerns that persistent inflationary pressures, exacerbated by rising energy prices, could complicate the interest rate outlook.
The combination of higher oil prices, cautious tech earnings reactions, and a tight labor market left investors grappling with the prospect of a more hawkish Federal Reserve. As oil continues to climb, markets will closely monitor any further escalation in the Middle East and its impact on inflation and monetary policy.
This article is for informational purposes only and does not constitute financial advice.
