The stock market fell on Friday as a sharp sell-off in chip stocks weighed on investors alongside escalating tensions in the Middle East that sent oil prices surging. The Nasdaq Composite declined 1.4% to 25,520.24, while the S&P 500 dropped 1.01% to close at 7,457.69, according to CNBC. For the week, the Nasdaq shed 2.9%, the S&P dropped 1.6%, and the Dow fell 0.9%, marking the first week of broad losses since early June.
Semiconductor stocks led the decline, with the VanEck Semiconductor ETF (SMH) falling more than 4% on Friday, extending pressure on chip names as investors questioned whether the artificial intelligence-driven rally had pushed valuations too far. Financial Times reported that U.S. chip stocks posted their worst week in more than a year, as shares of Applied Materials, Lam Research, Intel, KLA Corp., and Arm Holdings each fell about 4%, while Micron Technology and Nvidia dropped more than 2%.
Concerns about the pace of AI spending weighed on the sector. Angelo Kourkafas, senior investment strategist at Edward Jones, noted that “we are seeing signs of fatigue, with end-user demand for AI becoming more price sensitive and the market starting to penalize companies that are ramping spending too aggressively,” according to CNBC.
Middle East Tensions Drive Oil Higher
Oil prices surged on renewed hostilities between the U.S. and Iran, adding to investor anxiety about energy supply disruptions. Benchmark U.S. oil futures climbed 9.4%, or $6.73 a barrel, to end at $78.14 on Monday, July 13, according to the Wall Street Journal. Oil prices posted a 16% weekly jump as the U.S. and Iran intensified attacks, according to The National News.
On Friday, Kuwait reported that Iran attacked a power and water desalination plant, while U.S. Central Command said it had completed its sixth consecutive evening of strikes against Iran, hitting dozens of military targets including logistics infrastructure and maritime capabilities, according to CNBC. The escalation disrupted energy flows through the Strait of Hormuz, which typically handles around 20% of the world’s oil traffic.
Oil prices remained near their highest level since mid-June as the Iran war escalated, according to Reuters. David Wagner, head of equities at Aptus Capital Advisors, acknowledged the market reaction but remained cautiously optimistic. “The latest move in oil is going to freak people out, but we still remain right in the ballpark of average,” he said, adding, “I’m still bullish, but there might be more volatility moving forward.”
The stock market sell-off reflects investor concerns about multiple headwinds: the maturation of the artificial intelligence investment cycle, questions about semiconductor valuations, and geopolitical risks tied to Middle East tensions that threaten energy prices and global supply chains. The combination of a chip sector pullback and oil price volatility has created an environment where investors are rotating toward defensive positions and reassessing their exposure to technology stocks that drove much of the market’s gains earlier in the year.
Sources
- CNBC — Nasdaq and S&P 500 declines on July 17; VanEck Semiconductor ETF performance; oil price movements; U.S. strikes on Iran and Kuwait attack details; analyst commentary from Angelo Kourkafas and David Wagner.
- Investopedia — Weekly declines for Nasdaq, S&P 500, and Dow Jones.
- Financial Times — U.S. chip stocks posting worst week in more than a year.
- Wall Street Journal — Benchmark U.S. oil futures climb to $78.14 on July 13.
- Semafor — Oil prices jumped 10% on Monday, the biggest single-day rise since 2020.
- The National News — Oil prices posted 16% weekly jump as U.S. and Iran intensified attacks.
- Reuters — Oil prices remained near highest level since mid-June as Iran war escalated.
