Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., July 23, 2026.
Brendan Mcdermid | Reuters
U.S. equities fell on Thursday, as oil prices surged amid escalating conflict in the Middle East, while investors weighed quarterly results from two of the largest companies in the world, with Alphabet’s fueling concerns about increased artificial intelligence spending.
The Dow Jones Industrial Average lost 506.93 points, or 0.97%, to end at 51,711.65. The S&P 500 dropped 1.21% to 7,408.30, while the Nasdaq Composite declined 2.15% to close at 25,137.69. The tech-heavy index was bogged down by a 7% drop in Alphabet and a 14% loss in Tesla following their earnings reports.
Oil prices put more pressure on stocks, as they soared after Yemen’s Tehran-backed Houthi militant group claimed attacks on two Saudi Arabian tankers in the Red Sea, fueling concerns about an expansion of the conflict in the Middle East. Prices also moved higher after U.S. President Donald Trump threatened to bomb Iranian infrastructure.
“From this point forward, any time the Islamic Republic of Iran shoots at a ship in the Strait of Hormuz, whether it be by Missile, Rocket, Drone, or any other device or weapon, the United States will bomb and destroy ONE BRIDGE OR POWER PLANT, including those located next to, or in, the Capital City of Tehran,” the president wrote in a post on Truth Social.
Later Thursday, Axios reported that Trump said he’s “considering a massive attack” on Iran. He told the news outlet that it would be “bigger than ever before,” before adding, “I am close to making a decision. We are all set for it.” The president did not give a deadline for the decision, however.
Brent crude futures gained 7% to settle at $100.69, while U.S. West Texas Intermediate crude futures advanced 6% to settle at $92.19 per barrel. Both Brent and WTI were trading at their highest levels since before the U.S. and Iran reached an agreement to bring their war to an end last month.
Brent crude futures over the last six months
Treasury yields rose alongside oil prices, with the 10-year yield briefly topping 4.7% to reach its highest level since January 2025. Rates on the short-end of the yield curve also rose, with the 2-year yield touching a session high of 4.37%.
Ross Mayfield, Baird investment strategist, noted that the 2-year yield’s level is “probably more important” for the market for insights on the Federal Reserve’s interest rate path. At present, fed funds futures trading indicates a more than 80% chance the central bank will hike rates in September, up from 52% a week ago, per the CME FedWatch tool.
“It’s pretty hard to ignore [the conflict], not just because of the oil prices but also because of the pressure across the yield curve,” he told CNBC. “The fundamentals, I think, set the market up to have some long-term sustainability, or at least medium-term. But for the next two to three months, it’s going to be all about Iran again.”
In addition to oil, equities were weighed down by Alphabet shares after the Google parent lifted its forecast for 2026 capital expenditures to between $195 billion and $205 billion, pointing to strong artificial intelligence demand. That increase from its prior forecast range of $180 billion to $190 billion comes as investors have grown more cautious in recent months about hyperscalers’ spending around the AI effort.
Other hyperscalers Meta Platforms, Microsoft and Amazon were also in the red Thursday.
Tesla’s drop came after the electric vehicle maker posted a big earnings miss for the second quarter. The company’s operating expenses also rose faster than revenue during the period.
Both Tesla and Alphabet posted negative free cash flow for the second quarter.
