US stocks fell sharply on Thursday as a surge in oil prices, rising bond yields, and disappointing earnings from major technology companies weighed on market sentiment. The Dow Jones Industrial Average dropped approximately 500 points during morning trading, with the S&P 500 losing nearly 1% and the Nasdaq Composite falling around 1.7%.
The sell-off pushed major indexes to multi-week lows, with declining shares outnumbering advancing stocks on both the New York Stock Exchange and Nasdaq. The CBOE Volatility Index rose to 18.79 after three consecutive declines, reflecting heightened investor anxiety.
Oil Rally Raises Inflation Concerns
Brent crude futures surged 6.7% to $100.37 per barrel during European trading, while West Texas Intermediate gained 5.5% to $91.91 per barrel. The rally followed reports that Houthi forces attacked two Saudi oil tankers near the Bab el-Mandeb Strait, raising fresh supply concerns and threatening another major shipping route.
Higher oil prices pushed Treasury yields upward, with the 10-year yield reaching its highest level since January 2025 and the two-year yield hitting a 17-month high. This renewed inflation fears, prompting traders to increase bets on a Federal Reserve rate hike at the July meeting. CME FedWatch data showed markets pricing a 38% chance of a quarter-point increase, up from about 12% just one week earlier.
Alphabet and Tesla Pressure Nasdaq
Alphabet shares fell more than 6% after the company raised its 2026 capital spending forecast, with investors focusing on costs tied to artificial intelligence infrastructure. AJ Bell investment director Russ Mould noted a “healthy degree of scepticism” about returns from such spending. The decline pulled communication services stocks lower.
Tesla shares dropped more than 12% after reporting negative quarterly free cash flow and higher operating expenses relative to revenue growth. CEO Elon Musk called 2026 a “massive capex year,” with spending plans including robots, data centers, manufacturing projects, and its robotaxi business.
Energy Shares Rise With Crude Prices
Energy companies moved higher as oil prices extended a five-day rally. Exxon Mobil gained 1.6%, while Chevron rose 1.9%. Diamondback Energy, Devon Energy, ConocoPhillips, and Occidental Petroleum gained between 1.7% and 2.7%. Refiners also advanced, with Valero Energy, Marathon Petroleum, and Phillips 66 rising between 1.1% and 1.3%.
Analysts also watched shipping activity in the Middle East. UBS analyst Giovanni Staunovo said subdued vessel traffic could slow the region’s production recovery.
Rate Expectations Shift Before Fed Meeting
The oil rally renewed concern that higher fuel costs could keep inflation elevated. New labor data also supported expectations that the Fed could keep policy tight, with initial unemployment claims falling to 187,000, below forecasts of 210,000.
Airline shares faced pressure as higher fuel costs threatened operating expenses, while transport stocks moved lower. Lockheed Martin shares rose after the company lifted its 2026 forecasts, and ServiceNow gained after raising its annual subscription revenue outlook.
Markets will likely remain focused on oil prices, upcoming inflation data, and the Federal Reserve’s next policy decision for direction.
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