Dow drops 1.7%, Nasdaq sinks 2% as US-Iran conflict deepens

US equities tumbled on Tuesday, reversing a sharp rebound from the prior session, as oil prices surged and investors grew increasingly concerned that the US-Iran conflict could last longer than initially anticipated.

The Dow Jones Industrial Average fell 844 points, or 1.7%.

The S&P 500 declined 1.7%, while the Nasdaq Composite dropped 2%, reflecting broad-based selling across sectors.

The renewed market weakness followed a spike in crude prices.

Brent crude, the international benchmark, climbed above $84 a barrel, rising 8% Tuesday after a 6% gain on Monday.

West Texas Intermediate crude jumped 8% to above $77 per barrel, also extending a 6% advance from the previous session.

Hormuz threat raises supply concerns

According to media reports, an Iranian Revolutionary Guard commander said the Strait of Hormuz — widely regarded as the world’s most critical transit route for crude oil — has been closed, and warned that Iran would set ablaze ships attempting to pass through.

The statement intensified fears of prolonged supply disruptions in global energy markets.

Additional developments signaled a deepening conflict as it entered its fourth day.

The US embassy in Riyadh was reportedly struck by drones as Iran escalated its attacks.

The US State Department ordered evacuations of personnel from Bahrain, Iraq and Jordan.

Tehran-backed Hezbollah launched missiles and drones at Tel Aviv, and concerns mounted over how long Gulf states such as the UAE can withstand continued missile and drone barrages.

President Donald Trump warned that the conflict could extend beyond four weeks.

Inflation fears return

The surge in energy prices also pushed Treasury yields higher, as investors worried that higher oil costs could reignite inflation pressures.

That dynamic comes at a time when market participants have been positioning for additional Federal Reserve rate cuts to support the economy.

Monday’s session had followed a more optimistic script.

Stocks staged a significant intraday comeback, with the S&P 500 and Nasdaq erasing steep early losses to finish slightly higher.

Investors leaned on a historical playbook that geopolitical flare-ups often prove short-lived and have limited long-term economic impact.

However, the overnight jump in oil and the widening scope of the conflict undermined that narrative.

Energy gains, tech slides

Energy stocks were among the few bright spots Tuesday, buoyed by higher crude prices. Most other sectors traded lower.

Technology shares, which had led Monday’s rebound, were under renewed pressure.

Nvidia and Broadcom each fell about 2%. US memory stocks also declined, tracking sharp losses in South Korean memory chipmakers.

The majority of stocks within the S&P 500 traded in negative territory.

Shares of Blackstone dropped 7% after the Financial Times reported that one of its private credit funds experienced $1.7 billion in net outflows during the first quarter.

The report added to investor unease in financial stocks amid broader risk-off sentiment.

The CBOE Volatility Index jumped to its highest level since November, reflecting heightened demand for downside protection.

With oil and gas prices climbing and geopolitical risks mounting, investors are reassessing assumptions that the conflict will be contained.

For now, energy markets remain the key barometer, and equity volatility is likely to persist as long as uncertainty over supply routes and regional stability continues.