Panic selling spreads on fears of U.S.-Iran escalation… all three major indexes plunge [New York markets briefing]

U.S. equities tumbled across the board on the 27th (local time) as fears of a wider conflict intensified after the United States and Israel carried out airstrikes on Iran’s nuclear facilities and steel plants.

In trading at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 793.47 points (down 1.73%) from the previous session to close at 45,166.64. The Standard & Poor’s (S&P) 500 slid 108.31 points (down 1.67%) to 6,368.85, and the Nasdaq Composite dropped 459.72 points (down 2.15%) to finish at 20,948.36.

Following the Nasdaq, which entered correction territory (a decline of more than 10% from its most recent peak) the previous day, the Dow also slipped into correction territory on the day. The S&P 500’s pullback from its peak also widened to 9%. The Russell 2000, which is dominated by mid- and small-cap stocks, had already entered correction territory.

The selloff was directly triggered by fears of escalation. In addition to the bombing of Iran’s nuclear facilities and steel plants by the United States and Israel, investors focused on a “sell first, ask questions later” stance as reports piled up that U.S. forces could land on Iran’s Kharg Island over the weekend and that the Pentagon was reviewing a plan to deploy an additional 10,000 ground troops to the Middle East.

Iranian Foreign Minister Abbas Araghchi warned that “key infrastructure, including two major steel plants, power stations and civilian nuclear facilities, was attacked,” adding that “Israel will pay a heavy price.”

Meanwhile, the United States and Iran are coordinating ceasefire talks via mediator Pakistan. There were also reports that Iran’s counterproposal would be delivered to the White House on the day. After the market close, Steve Witkoff, U.S. President Donald Trump’s Middle East envoy, said, “I think there will be a meeting with Iran this week.”

However, such optimistic remarks were not enough to calm market anxiety.

Jay Hatfield, founder of Infrastructure Capital Advisors, said, “Investors now want to see the conflict actually resolved, not just words,” adding, “The longer the Strait of Hormuz is blocked, the worse the oil market situation will get.”

By sector, consumer discretionary plunged more than 3%, while financials, communication services and technology fell more than 2%. Mega-cap tech stocks with market capitalizations of more than $1 trillion also declined across the board: Meta and Amazon slid 4% each, and Microsoft is on track for its worst quarterly performance since the fourth quarter of 2008, with losses this quarter topping 25%.

In contrast, only the energy sector rose, up 1.87%, as global crude prices surged on the Middle East war. Chevron and Exxon Mobil gained 1.62% and 3.36%, respectively.

The Cboe Volatility Index (VIX) rose 3.61 points (up 13.16%) from the previous session to 31.05. In the federal funds rate futures market, the probability of a 25-bp rate hike by December fell to 22.7% from 35.1% the previous trading day, while the probability of rates being held steady climbed to 71.8%.