U.S. stocks fell sharply on Thursday on concerns that Israel and the United States would resume attacks on Iran, sending oil prices higher while major technology stocks failed to hold on to recent gains.
As of mid-morning, the S&P 500 was down 1.4%, while the tech-heavy Nasdaq was down 2.2%. International Brent crude oil prices rose more than 2%, and U.S. crude oil prices rose more than 1%.
Bucking the trend of the past few months, demand for Treasuries has also increased as riskier assets such as technology stocks have sold off and investors have sought safe havens. This drives bond yields lower.
Reports on Wednesday that Israel and the United States were preparing for military action against Iran after the November midterm elections fueled part of the broad sell-off.
Possible targets include Iran’s energy infrastructure and nuclear facilities, according to the New York Times.
U.S. military and diplomatic personnel also evacuated from several countries in the Middle East on Wednesday, according to NBC News.
Iranian officials have promised widespread retaliation for any attack, pointing to key Middle Eastern data center sites and undersea network cables as potential targets.
Major technology stocks led losses in early trading, with Meta and Tesla falling after reporting quarterly earnings late Wednesday.
Meta’s earnings and revenue beat expectations, but only after excluding the billions of dollars in legal fines the company paid last quarter. It also warned investors that it expects increased spending in the coming year to meet demand for computing power.
Another regulatory filing showed that Meta plans to spend an additional $825 billion on contracts related to the construction of its artificial intelligence infrastructure.
At the same time, Tesla said it was reining in its capital spending plans, disappointing investors who had hoped for a more aggressive expansion signal.
Adding to the Nasdaq’s slide, Nvidia CEO Jensen Huang said on CNBC Thursday morning that money to fund the artificial intelligence investment boom has become “scarce” due to rising interest rates and an overhang in existing spending commitments.
U.S. markets remain close to all-time highs. But signs of declining returns on the artificial intelligence investment boom have led to sharper volatility of late.
A sharp sell-off in French government debt has also dragged European stocks lower in recent weeks.
“It’s been another tough 24 hours for markets as investors grapple with concerns over the growth of artificial intelligence, rising oil prices and ongoing fiscal pressures,” Henry Allen, director and macro strategist at Deutsche Bank, wrote in a note to clients on Thursday.
A sharp market drop could also further undermine Republicans’ midterm election prospects.
President Donald Trump often points to strong gains in the stock market as evidence that his economic agenda has made Americans wealthier. A major market drop ahead of the Nov. 3 election would undermine Trump and the Republican Party’s core arguments.