New York, May 7, 2026, 19:01 (EDT)
Stocks in the U.S. pulled back from their record highs on Thursday, with oil prices spiking after the market closed. Fresh U.S.-Iran tensions put pressure on the “peace trade” that had fueled Wall Street’s gains earlier in the week. By the end of the session, the S&P 500, Nasdaq, and Dow all slipped into the red as earlier momentum faded. Reuters
Timing is key here—investors are framing the Iran talks through the lens of inflation, not only geopolitics. A durable agreement might relieve crude supply strains through the Strait of Hormuz, that slim Gulf passage moving roughly a fifth of the world’s oil and gas before the conflict. But another escalation risks holding fuel prices and bond yields up.
Late Thursday brought that risk back into play. U.S. crude futures climbed up to 3% following a Reuters report citing fresh tensions between Washington and Tehran. As of 2233 GMT, West Texas Intermediate—America’s crude benchmark—was trading at $97.26 a barrel, having settled lower the session before.
The S&P 500 closed down 0.38% at 7,337.11, while the Nasdaq Composite slipped 0.13% to 25,806.20. The Dow Jones Industrial Average finished off 0.63% at 49,596.97. Both the S&P 500 and Nasdaq had touched new intraday highs earlier, but the rally lost steam as oil prices reversed and chip stocks came under pressure.
Semiconductors bore the brunt. Arm Holdings slid as investors worried about supply for its upcoming AI chip, overshadowing an upbeat outlook. Intel and Advanced Micro Devices both shed around 3%. The PHLX chip index lost 2.7%, tracking the wider sector slump.
The selloff didn’t come close to wiping out the quarter’s surge. Mike Dickson, who oversees portfolio management at Horizon Investments, described it as a “rip-roaring” comeback powered by fundamentals. Societe Generale strategist Manish Kabra called out a “broad-based profit boom” in U.S. earnings. Reuters
There’s a chance oil ends up back in control. Daniel Skelly, who leads market research and strategy at Morgan Stanley Wealth Management, flagged in a note that oil’s ultimate effect on inflation remains “still an open question.” Meanwhile, Investec strategists pointed out that ongoing inventory drawdowns might not be sustainable if energy prices spike once more. Reuters
Traders were still gauging Iran’s next move—a key unknown. According to Investing.com, which referenced the Wall Street Journal, Tehran won’t let the U.S. reopen the strait unless reparations are paid. Senior Iranian official Mohsen Rezaei dismissed U.S. proposals as “unrealistic.” Meanwhile, Saudi Arabia and Kuwait have relaxed restrictions, now allowing more U.S. military access to bases and airspace. Investing
By the end of the session, that uncertainty was hitting stocks too. Mark Luschini, chief investment strategist at Janney Montgomery Scott, described investors working through “pretty heady gains,” and noted the “war trade” was coming off — meaning positions tied to energy, defense, and Middle East risk were being reversed. Investing
The Federal Reserve got few signals to change course after fresh economic numbers. Initial jobless claims edged up to 200,000—still coming in under forecasts. Traders were already bracing for Friday’s non-farm payrolls, the standard U.S. jobs snapshot. “Remarkably stable,” is how Joseph Brusuelas, RSM US’s chief economist, described the labor market. Investing
Company headlines drove stocks in both directions. Datadog jumped 31% on the back of a higher full-year outlook. On the flip side, Whirlpool dropped roughly 12%—it missed first-quarter sales targets and put its dividend on ice.
The market remains positive for the week and sits well above where it started the year, though Thursday’s pullback underscored just how quickly sentiment can flip from records to risk-off. Investors are bracing for Friday’s jobs data, and any word out of Tehran could tip the balance on whether the rally finds new legs or oil prices trigger fresh selling.
