🪷The growing risk of a broader Middle East conflict — in a region vital to global oil production — has heightened investor anxiety.
The escalation raised geopolitical risks, drove oil prices sharply higher, and sparked fears of slower global growth and faster inflation.
The Dow Jones Industrial Average dropped 1.79% to 42,197.79 points. The S&P 500 lost 1.12% to close at 5,977.57, while the Nasdaq Composite fell 1.30% to 19,406.83 points.
The sell-off followed Iran’s retaliation to Israel’s strikes, which targeted nuclear sites, missile factories, and military infrastructure in what has been described as the most extensive assault on Iran since the Iran-Iraq war of the 1980s. Explosions were seen over Tel Aviv and Jerusalem, with air raid sirens sounding across Israel after what the military described as a barrage of missiles launched from Iran.
Israel said the attacks marked the beginning of a prolonged military campaign aimed at preventing Tehran from developing a nuclear weapon. Iran vowed a forceful response.
Worst-Case Scenario Unfolds in the Middle East
Global equities had been rallying steadily since early April, partly on optimism that President Donald Trump’s tariff agenda would be less aggressive than previously feared. That momentum was abruptly halted as Israel’s military strike hit dozens of strategic Iranian targets.
The offensive came just days before U.S. and Iranian officials were scheduled to attend the sixth round of nuclear talks.
Trump took to Truth Social urging Iran to accept a new nuclear deal, warning that the “next planned attacks” could be “even more brutal.” He emphasized: “No more deaths, no more destruction — DO IT BEFORE IT’S TOO LATE!” He claimed he had previously told Iranian officials “in the strongest terms” to make a deal.
The White House had warned earlier that it would consider military options if the nuclear negotiations failed, with a critical response deadline looming next Thursday.
In retaliation, Iran launched more than 100 drones into Israeli territory, according to a military spokesperson.
The growing risk of a broader Middle East conflict — in a region vital to global oil production — has heightened investor anxiety. With markets already uneasy over rising trade tensions, fears are mounting that this could further dampen global economic growth.
Global Market Shock
Airline stocks plunged on surging fuel cost concerns. Delta Air Lines fell 4.6%, United Airlines lost 3.2%, Southwest Airlines dropped 2.8%, and American Airlines tumbled 5.1%.
In contrast, defense stocks rallied on rising geopolitical tensions. Lockheed Martin gained 3.6%, Northrop Grumman rose 3.2%, L3Harris Technologies advanced 2.8%, and RTX Corp also posted gains.
Energy shares were also among the top performers, buoyed by the spike in crude prices following the Israeli attacks. Halliburton, APA Corporation, and EOG Resources each climbed more than 4%.
Consumer Sentiment Rebounds
Despite the turmoil, the University of Michigan’s preliminary consumer sentiment index for June showed a notable improvement. The reading rose to 60.5 in the first half of the month, up from 52.2 in May.
“Consumers appear to have regained some composure following the shock of April’s steep tariff hikes and the political turbulence that followed,” said Joanne Hsu, director of consumer surveys at the University of Michigan.