BY EMMANUEL OGBONNA
Wall Street retreated sharply from record highs on Friday as surging oil prices and rising Treasury yields sparked a broad global sell-off in equities, with technology and artificial intelligence-related stocks leading the decline after months of extraordinary gains.
The downturn spread across major financial markets in the United States, Europe and Asia as investors grew increasingly concerned that escalating energy prices linked to the ongoing conflict involving Iran could reignite inflation pressures and force central banks to maintain higher interest rates for longer than previously expected.
The benchmark S&P 500 fell 1.2%, pulling back from the all-time high it reached a day earlier. The dropped 537 points, or 1.1%, while the tech-heavy declined 1.5% from its own record level.
Technology companies that had powered much of the market’s rally in recent months suffered some of the steepest losses as investors reassessed valuations following a historic run fueled by enthusiasm surrounding artificial intelligence.
Chipmaker , widely viewed as one of the primary beneficiaries of the AI boom, fell 4.4% and was the single biggest drag on the S&P 500. Despite the drop, the company’s shares remain up more than 26% since the beginning of the year, underscoring the scale of the rally that had preceded Friday’s sell-off.
also came under heavy pressure, sliding 6.6% in one of the sharpest declines among major chipmakers. The stock, however, is still higher by roughly 154% this year after benefiting from soaring demand for memory chips tied to AI data centers and advanced computing systems.
Market strategists said the retreat reflected growing concerns that stocks had become overheated after months of relentless gains.
Brian Jacobsen, chief economic strategist at Annex Wealth Management, said markets appeared to have entered overbought territory following the rapid climb in equity prices. He noted that while strong corporate earnings and a resilient U.S. economy continue to support the broader market, investors should expect increased volatility.
“The path is unlikely to be smooth,” Jacobsen said, adding that periods of market turbulence require discipline from investors rather than optimism alone.
The latest sell-off was intensified by a sharp rise in oil prices as the conflict involving Iran continued to disrupt global energy supplies. The closure of the strategically vital Strait of Hormuz to oil tankers has prevented shipments of crude from reaching customers around the world, creating fears of supply shortages and further inflationary pressure.
Brent crude, the international benchmark for oil prices, climbed another 3.3% to settle at $109.26 per barrel. Before the conflict escalated, Brent had traded near $70 a barrel, highlighting the magnitude of the recent surge.
The rise in energy prices has complicated the outlook for the global economy. While many major U.S. corporations continue to report that consumers are spending steadily despite higher gasoline prices, surveys have shown increasing anxiety among households about inflation, tariffs and the broader economic impact of geopolitical instability.
Those concerns were reflected most clearly in the bond market, where Treasury yields rose sharply as investors reduced expectations for interest-rate cuts from the Federal Reserve.
The yield on the benchmark 10-year Treasury climbed to 4.59% from 4.47% late Thursday, marking a significant move in the normally stable bond market. Before the outbreak of the conflict, the yield had been closer to 3.97%.
Meanwhile, the 30-year Treasury yield rose to 5.13%, returning to levels last seen in 2007 before the global financial crisis triggered a collapse in yields as investors rushed into safer assets.
Higher Treasury yields increase borrowing costs for consumers and businesses alike, making mortgages, corporate loans and other forms of financing more expensive. Rising yields also tend to reduce the appeal of stocks by offering investors higher returns from lower-risk government debt.
Smaller companies were hit particularly hard during Friday’s trading because many rely more heavily on borrowing to finance expansion and operations. The , which tracks smaller U.S. companies, fell 2.4%, twice the decline recorded by the S&P 500.
By the closing bell, the S&P 500 had lost 92.74 points to finish at 7,408.50. The Dow Jones Industrial Average ended at 49,526.17 after falling 537.29 points, while the Nasdaq Composite dropped 410.08 points to close at 26,225.14.
Investor expectations surrounding Federal Reserve policy have shifted dramatically in recent weeks as inflation fears intensified. Traders have largely abandoned forecasts that the central bank would resume cutting interest rates this year. Some investors are now even betting the Fed may consider raising rates again in 2026 if inflation accelerates further, according to market data compiled by CME Group.
Economic data released Friday added to the upward pressure on yields after coming in stronger than analysts expected. One report showed U.S. industrial production increased more than forecast last month, while another indicated manufacturing activity in New York state expanded at a faster pace.
The market weakness extended well beyond the United States.
Major indexes across Europe and Asia dropped more than 1.5% as investors reacted to the same concerns about inflation, energy prices and elevated interest rates.
South Korea experienced one of the most dramatic declines, with the plunging 6.1%. The index had recently surged to record highs due largely to investor enthusiasm for artificial intelligence-related companies such as , but sentiment reversed abruptly after the benchmark briefly crossed the 8,000-point mark for the first time.
Some analysts on Wall Street said Friday’s sharp reversal may serve as a warning that the extraordinary momentum behind AI-related investments could become increasingly unstable after months of rapid gains.
Jonathan Krinsky, chief market technician at BTIG, said the sudden volatility demonstrated how quickly investor sentiment can shift after extended rallies, particularly in highly concentrated sectors such as technology and artificial intelligence.
The sell-off marked one of the clearest signs yet that investors are becoming more cautious about the sustainability of the market’s record-breaking run as geopolitical tensions, inflation concerns and rising borrowing costs continue to weigh on global financial markets.
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