Wall Street's major indexes closed sharply lower on Thursday (Friday AEST), with the Nasdaq tumbling more than 2% as disappointing reactions to earnings from major technology companies reignited concerns over surging artificial intelligence spending, while oil prices climbed to US$100 a barrel amid escalating Middle East tensions.
The Dow Jones Industrial Average fell 506.9 points, or 1%, to 51,711.7. The S&P 500 declined 90.7 points, or 1.2%, to 7,408.3, while the Nasdaq Composite dropped 553.2 points, or 2.2%, to 25,137.7.
Investor sentiment deteriorated as hostilities in the Middle East intensified, raising fears of supply disruptions in global energy markets.
The United States launched another round of air strikes on Iran, prompting retaliatory attacks on U.S. military bases in neighbouring countries.
Meanwhile, U.S. President Donald Trump vowed "major military punishment" against Iran and the Houthis after the Yemen-based group struck two Saudi oil tankers in the Red Sea.
The escalation pushed crude oil prices to US$100 a barrel, fuelling concerns that higher energy costs could complicate the inflation outlook just days before the Federal Reserve's next policy meeting.
Defence stocks outperformed as investors sought exposure to companies expected to benefit from rising geopolitical tensions.
Lockheed Martin surged 10.5% after raising its 2026 sales and profit forecasts, supported by robust defence demand.
RTX climbed 7.3%, making it one of the S&P 500's strongest performers, after also lifting its 2026 sales and earnings outlook on sustained demand for commercial aerospace maintenance and military systems.
Technology stocks led the broader market lower following a fresh round of earnings.
Alphabet, Google's parent company, fell 7% after unveiling higher capital expenditure plans tied to AI infrastructure, reinforcing investor concerns over rising spending and cash burn.
Tesla plunged 14.5% after reporting negative free cash flow in the second quarter for the first time in more than two years, adding to pressure across the growth sector.
On the bond markets, U.S. Treasury yields rose as investors priced in persistent inflation risks. The 10-year Treasury yield increased 0.9% to 4.699%, while the two-year yield gained 1.1% to 4.351%.
