U.S. stocks tumble as Iran conflict fears and AI spending concerns weigh on markets

U.S. equity markets dropped sharply on Thursday, with the S&P 500 down about 1.3% and the Nasdaq falling roughly 2.5% by early afternoon. Brent crude rose close to 4% and U.S. crude gained 2.5% as concerns grew that the United States and Israel could launch a new military operation against Iran.

Investors shifted toward Treasury bonds, pushing the 10-year yield below 5% for the first time since late September. The move followed reports that Israel and the United States were preparing to target Iran’s energy infrastructure and nuclear sites, and that U.S. personnel were being evacuated from several Middle-East countries.

“It’s been another difficult 24 hours for markets, as investors grapple with AI growth concerns, higher oil prices, and ongoing fiscal stress,” wrote Henry Allen, director and macro strategist at Deutsche Bank, in a client note.

Tech shares led the declines. Meta reported earnings that beat forecasts after excluding recent legal penalties and warned of higher spending to support its AI computing needs, including a disclosed plan to spend an additional $825 billion on AI infrastructure contracts. Tesla announced a reduction in its capital-expenditure plans, disappointing investors seeking a more aggressive growth outlook.

Nvidia CEO Jensen Huang told CNBC that financing for the AI boom was becoming “scarce” because higher interest rates and existing spending commitments were limiting capital availability, adding further pressure to the Nasdaq.

Despite the sell-off, the S&P 500 remains close to the record highs set earlier this month. A broader sell-off in French government bonds has also weighed on European equities. Analysts note that a significant market decline in the United States could affect the political environment ahead of the November 3 midterm elections, where President Donald Trump often cites strong market performance as evidence of his economic agenda’s success.