Escalating tensions between the US and Iran kept geopolitical risks in focus as President Donald Trump threatened further military action and warned of consequences for Houthi attacks on shipping.
Meanwhile, technology stocks suffered steep losses after Alphabet and Tesla earnings heightened concerns over AI spending.
Gold prices retreated as rising oil prices and Treasury yields dampened demand for the precious metal, while crude oil surged above $100 a barrel on fears of further supply disruptions.
Trump threatening more attacks on Iran
President Donald Trump signaled that the US could intensify its military campaign against Iran as the conflict entered a new phase following the collapse of a truce signed last month.
According to an Axios report, Trump is considering a “massive attack” and is close to making a decision, while also warning that both Iran and the Yemen-based Houthis would face military punishment if shipping in the Red Sea comes under further attack.
The renewed tensions followed claims by the Houthis that they struck two Saudi oil tankers, opening another front in the conflict that has already disrupted traffic through the Strait of Hormuz.
The conflict, which began after US and Israeli attacks on Iran in February, has seen 12 consecutive days of strikes, with both sides continuing to exchange attacks.
Iran warned it would retaliate against regional infrastructure, including energy facilities, if the US expands its campaign.
Tehran also reiterated that there is little prospect of negotiations while Washington continues military operations.
The deteriorating security environment has sharply reduced shipping through the Strait of Hormuz, while attacks near the Bab el-Mandeb Strait have added further risks to global energy supplies.
Magnificent 7 stocks fall after Alphabet and Tesla earnings
Technology stocks came under heavy pressure on Thursday, with the Bloomberg Magnificent 7 Index falling 4.8% and erasing roughly $767 billion in market value.
Investor sentiment weakened after Alphabet increased its capital expenditure forecast to as much as $205 billion this year, while Tesla reported weaker-than-expected profits and indicated that 2026 would be a year of elevated capital spending.
The selloff reflected growing concerns that the massive investments required to build AI infrastructure may weigh on profitability before producing meaningful returns.
Alphabet’s increased spending pushed its cash flow into negative territory for the first time since becoming a public company.
Tesla shares plunged 14%, marking their biggest intraday decline since June 2025, while Alphabet dropped 6.6%.
Other major AI spenders also declined, with Microsoft, Amazon and Meta Platforms all trading lower ahead of their earnings reports next week.
Apple and Nvidia recorded comparatively smaller declines.
Apple has largely avoided the recent AI spending surge, while Nvidia has lagged the broader semiconductor sector this year as investor attention shifts toward memory chipmakers supporting AI infrastructure.
Gold price falls 2% as dollar strengthens
Gold prices fell sharply after reaching a two-week high in the previous session as rising oil prices fueled inflation concerns and strengthened expectations that interest rates could remain elevated.
Spot gold dropped 1.9% to $4,049.74 per ounce, while US gold futures settled around 2.5% lower at $4,048. The US dollar strengthened and the benchmark 10-year Treasury yield climbed to its highest level in more than a year, reducing the appeal of non-yielding bullion.
Markets are now focused on next week’s Federal Reserve policy decision, with traders increasing expectations for a September rate hike.
Brent crude hits $100 for the first time since May
Oil prices extended their rally, with Brent crude climbing above $100 per barrel for the first time since late May and US West Texas Intermediate rising above $91.
The advance followed reports that Houthi forces attacked two Saudi oil tankers in the Red Sea, adding to supply concerns created by the near-halt in shipping through the Strait of Hormuz.
Brent crude rose 6.5% to $100.19 a barrel, while WTI gained 5.7% to $91.8. Brent has climbed nearly 40% this month as traders price in escalating geopolitical risks.
Shipping disruptions continue to tighten global supplies.
Traffic through the Strait of Hormuz has fallen sharply, Iranian oil exports have reportedly dropped significantly, and loading activity across the Gulf has slowed.
Goldman Sachs said Brent crude could exceed $120 per barrel in the fourth quarter if disruptions in the Strait of Hormuz persist into 2027, with additional upside possible if the Bab el-Mandeb Strait and Suez Canal also face prolonged disruptions.
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