Tech Titans Teeter Near Correction Amid Escalating Conflict

US Tech Stocks Face Pressure Amid Escalating Iran Conflict

US technology stocks are teetering on the edge of a correction as the ongoing conflict in Iran pushes oil prices higher and stirs fresh concerns about inflation.

The Bloomberg Magnificent Seven Index—which tracks major players like Nvidia, Apple, and Tesla—fell in New York trading and is now nearly 10% below its high from October. Although the group briefly dipped into correction territory earlier this month, it has not closed below that threshold. The selloff has also dragged down the Nasdaq 100 Index.

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“The Magnificent Seven have repeatedly seen their valuations outpace underlying business fundamentals, only to spend months correcting that excess,” explained Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute. “This pattern has been ongoing since last October, and we appear to be nearing its conclusion.”

The S&P 500 Index also declined, marking its third consecutive day of losses. Brent crude surged, and with oil prices climbing, bond traders have stopped anticipating a Federal Reserve rate cut this year.

As the Iran conflict enters its 13th day, both Iran’s Supreme Leader Mojtaba Khamenei and former President Donald Trump have taken firm stances. Khamenei declared the Strait of Hormuz should remain closed and warned that Iran would escalate the conflict if attacks persist. Trump, for his part, emphasized that preventing Iran from acquiring nuclear weapons and threatening the Middle East is a higher priority than oil prices.

According to José Torres, senior economist at Interactive Brokers, Khamenei’s remarks are a significant setback for investors hoping for a swift resolution. “The resulting uncertainty is hurting corporate profits, fueling inflation fears, and reducing expectations for rate cuts, all of which are making markets more volatile and leaving few safe havens,” Torres said.

The UK Navy reported that three commercial ships were attacked in the Arabian Gulf over the past day, indicating that hostilities are spreading beyond the Strait of Hormuz. UK Defense Secretary John Healey also noted growing evidence that Iran is deploying mines in the strait.

Market Outlook and Economic Risks

Dec Mullarkey, managing director at SLC Management, observed that neither side appears willing to de-escalate. He predicts oil prices could reach record highs if shipping disruptions continue through March. “The coming weeks will be crucial for energy and food prices, especially as farmers prepare for planting season,” he said.

Tariffs and Credit Market Developments

Traders are closely monitoring new tariff actions. The Trump administration has initiated several trade investigations, potentially leading to new tariffs to replace those recently overturned. Major economies such as China, the EU, and Japan are under scrutiny.

Chris Krueger of TD Cowen expects these Section 301 investigations to result in tariffs, possibly involving up to 60 countries.

Concerns over private credit continue to affect major banks and asset managers. Morgan Stanley and Cliffwater LLC have restricted withdrawals from their large private credit funds. While the Middle East conflict remains the dominant market issue, credit risks are also significant, according to Matt Maley of Miller Tabak.

Notable Stock Moves

• Bumble Inc. surged after the company shared a positive outlook and introduced an AI-powered matchmaking assistant.
• Dollar General Corp. fell as its sales forecast failed to impress investors, slowing the momentum it had built by consistently beating Wall Street expectations.
• Lucid Group Inc. declined following its investor day event.
• Stryker Corp. dropped as it continued to deal with the aftermath of a major cyberattack linked to Iran.

Sectors in Focus

• Fertilizer producers like CF Industries Holdings Inc. and Mosaic Co. reached new highs as supply concerns grew due to the conflict and disruptions in the Strait of Hormuz.
• Energy and chemical stocks advanced, while airline shares slumped as rising oil prices increased operational costs.
• Financial stocks declined, with alternative asset managers and major banks under pressure after withdrawal limits were imposed on private credit funds.
• Packaged food companies, including General Mills, Conagra Brands, and Campbell’s, were downgraded and saw their shares fall.
• Consumer staples stocks, such as Kroger Co., gained as investors worried that the Iran conflict could further restrict energy supplies and drive inflation higher.

Reporting assistance by Levin Stamm and Julien Ponthus.

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