The Dow plunges almost 800 points as higher oil prices keep inflation fears alive

Wall Street spent Thursday checking the gas gauge — because that’s where the market’s mood is being checked. After Wednesday’s relief rally, stocks slipped again as crude oil climbed again on the war in the Middle East, and the market re-centered itself around the oldest equation in finance: energy up, everything else suddenly feels heavier.

At the market’s close, the S&P 500 was down about 0.57%, the Dow was off roughly 786 points (about 1.6% and a rise from its midday plunge of over 1,000 points), and the Nasdaq $NDAQ +0.18% was down about 0.26%. Volatility perked up, too, with the VIX up 12.34% to sit over 23.8.

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Oil did most of the talking. During the morning, Brent climbed to about $84.56 a barrel, and U.S. crude to roughly $78.66, both sharply above late last week’s levels, and gas prices were already responding. AAA’s national average was $3.25 a gallon, up 9% from a week earlier. Traders kept a close eye on the Strait of Hormuz, the narrow chokepoint that typically carries about a fifth of the world’s oil, after reports of rising disruption risk and Iran’s claim of an attack on a tanker there.

Bonds took the hint. The 10-year Treasury yield pushed above 4.1% at the open — to about 4.13% from 4.09% late Wednesday, and from roughly 3.97% before the conflict began — the bond market’s way of walking onstage and reminding stocks that inflation math still outranks hope. The move has been brisk enough to put two-year yields on pace for their biggest four-day surge since May. And that means: The idea of rate cuts “later this year” reads more like a Magic 8 Ball response than an actual schedule.

The market’s internal politics stayed consistent — anything exposed to the consumer got punished, anything exposed to AI got a partial hall pass. Retailers and airlines were among the hardest hit as fuel costs rose and travelers were stranded across the region; smaller companies lagged harder, with the Russell 2000 down 1.5%. Energy held up, because when crude pops, the market hands the mic to the industry that benefits from all the chaos.

Meanwhile, Broadcom $AVGO -0.69% jumped (over 5% by late morning) after reporting results and pointing to a 74% jump in AI-chip revenue, nice little reminder that even on a war-driven day, investors will still pay up for a clean growth story — preferably one that comes with “AI” attached and a guidance line that doesn’t blink.

Thursday’s slide read like the war-risk premium getting financed in real time: crude popped, yields followed, and stocks absorbed the higher hurdle rate with a grimace and a shrug. But if oil keeps pressing higher, the stress migrates from traders’ screens to companies’ forecasts, then to consumers’ budgets — and then right back to traders’ screens.

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