Wall Street closed lower on Thursday, pulling back from record highs as a decline in software stocks and a significant increase in oil prices impacted investor confidence amid ongoing uncertainty surrounding the Iran situation.
The S&P 500 fell 0.4% after reaching a new intraday peak earlier in the day, while the Nasdaq Composite, heavily weighted in technology, dipped 0.9%, also retracting after setting a record during the trading session. The Dow Jones Industrial Average experienced a decline of about 180 points, or 0.4%, partially reversing its recent gains.
The drop was primarily driven by the software sector, which faced declines following earnings reports. IBM and ServiceNow saw their shares fall by 8% and 17%, respectively. Despite IBM exceeding expectations in both revenue and profit, its decision to maintain its full-year outlook disappointed investors. ServiceNow highlighted that the ongoing conflict in the Middle East negatively influenced its subscription revenue growth.
The decline affected the entire sector, leading to drops in stocks such as Microsoft, which decreased by 3%, Palantir Technologies, down 7%, and Oracle, which saw a roughly 6% fall. The broader iShares Expanded Tech-Software Sector ETF (IGV) also declined about 6%, reflecting the strain on the industry.
Geopolitical tensions continued to limit gains, as the Iran conflict has developed into a naval standoff between the US and Iran, despite a tenuous ceasefire. Both parties are competing for control over the Strait of Hormuz, with reports of commercial vessels being seized this week amplifying concerns about international trade routes.
In a notable escalation, US President Donald Trump ordered the Navy to “shoot and kill any boat” that lays mines in the strait, indicating a tougher stance. Additionally, reports suggested that air defense systems in Tehran were activated to target “hostile entities,” signaling heightened military activity in the area.
Also read: US futures slip after record rally as earnings fluctuations and geopolitical concerns weigh
Oil prices soared later in the day, adding to the market’s pressure. Brent crude settled above $105 per barrel after news emerged that Iran’s parliament speaker had stepped down from the US negotiating team, leading to fears of a more hardline approach from the Revolutionary Guard. However, this news is yet to be confirmed.
Earlier, Trump had expressed that extending the ceasefire was crucial as Iran’s government appeared “seriously fractured,” underlining the delicate and uncertain nature of diplomatic efforts.
Although markets seem to be showing signs of reduced sensitivity to Iran-related news, the ongoing conflict, combined with high oil prices and specific sector weaknesses, continues to keep investors cautious in the short term.
