Oil prices surge, stocks tumble as Israel and Iran clash

Oil prices surged and stocks tumbled Friday in the wake of Israel's strikes on Iran's top military officials and nuclear sites.

Losses in stock markets accelerated in the afternoon after Iran began retaliating by launching air strikes on Israel. The S&P 500 and Nasdaq ended the day down by more than 1%. The Dow Jones Industrial Average closed lower by nearly 770 points, a 1.8% decline. It was the worst percentage drop for all three indexes since May 21.

U.S. oil benchmark prices climbed roughly 7% to about $73 a barrel, the highest level since early April. U.S. government borrowing costs climbed. Tech stocks like Nvidia and Tesla moved lower, while shares in oil and defense-industry firms like Chevron, Lockheed Martin, and Palantir traded up.

Gold prices also neared all-time highs, rising more than 1% to $3,449 an ounce. The price of bitcoin fell more than 1% to less than $105,000.

Israel launched strikes on Iran early Friday local time, a dramatic escalation of long-running tensions between the two countries. Israel officials have warned of a "lengthy operation," while President Donald Trump said there was "much more to come" from Israel and that Iran should make a deal. Iran has so far retaliated by launching drones toward Israel while also threatening U.S. assets in the region.

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Iran says Israeli strikes continue after deadly overnight strikes

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The strikes add another chapter to what has already proven a turbulent year for markets. After a burst of investor optimism following Trump's inauguration in January, both stocks and bonds have been buffeted by uncertainty sparked by the chaos surrounding the president's tariff rollout. While stock indexes have overall recovered for a slight gain year to date, measures of daily market volatility remain elevated.

And while spiking oil prices usually signal higher gasoline prices for consumers in the coming days and weeks, experts said there was no need to rush out to the pump. Even with the latest increases, oil prices remain below pandemic-era highs.

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"Higher gas prices are coming. But it will not be insane, and ultimately gas prices remain affordable vs income," Patrick De Haan, head of petroleum analysis at price tracker GasBuddy, said in a post on X.

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Higher oil prices can also stoke inflation. If that happens, it could complicate the Federal Reserve's calculations as it continues to weigh a weakening job market against fears of the price impact from Trump's tariffs.

Before the strikes, stocks appeared to be heading for a winning week after the Trump administration signaled renewed interest in a rapprochement with China over trade concerns. The president said he planned on stabilizing import duties on Chinese goods at 55%, while those on U.S. goods into China would be set at 10%.