The US stocks declined for the second consecutive day on Friday as traders responded to the signs indicating that the Middle East conflict may take longer than anticipated. In the meantime, a record number of options expiries for March added to the pressure felt by the stocks. This led to a decline in the major stocks.
By midday in New York, the S&P 500 had dropped 0.8%, while the NASDAQ 100 fell 1%. The Dow Jones Industrial Average lost 0.5%. Treasury yields also moved higher, with the 10-year Treasury yield rising 12 basis points to 4.37%. In commodities, West Texas Intermediate crude gained 1% to $96.54 a barrel, while Brent crude climbed above $109. Bitcoin slipped 1% to $69,802.45, and Ether fell 0.6% to $2,133.04.
The sell-off showed a clear shift in market mood. Earlier, some investors had expected a short conflict and a limited impact on global supply. This view weakened as military tensions persisted. As a result, traders cut risk and moved away from sectors tied closely to growth and consumer demand.
The conflict in the Middle East was the main reason behind Friday’s market weakness. As the war approached its third week, traders saw no clear sign of easing tensions. Reports of a larger US military presence in the region strengthened the view that the conflict could continue longer than markets first expected.
This issue is important as oil prices have become a key factor in market analysis. Oil prices that rise too high can contribute to an increase in business costs, inflation risks, and consumer confidence. Oil prices can also impact the Federal Reserve's actions. Brent crude rose above $109, while traders continued to assess risks tied to energy flows through the Strait of Hormuz.
Strategists at Barclays said oil futures curves suggest markets now expect a more persistent higher-for-longer oil backdrop. This shift has increased concern about stagflation, where inflation stays elevated while growth slows. Investors now face the risk that energy prices could stay high long enough to affect both corporate margins and household spending.
The pressure spread across several asset classes. On the other hand, the Bloomberg Dollar Spot Index gained 0.5%, indicating an increase in the demand for the American currency. The euro dropped by 0.4%, trading at $1.1545. The British pound slid by 1%, trading at $1.3303. Gold fell by 2.1%, trading at $4,553.46 an ounce. This indicates that many investors are adjusting positions by seeking cash.
Friday’s quarterly options expiry created another source of instability. Nearly $5.7 trillion in notional options tied to individual stocks, indexes, and exchange-traded funds were set to expire. This marked the largest March expiry on record in data going back to 1996.
This event, usually called triple witching, can trigger sharp swings because many derivative positions expire at once. Traders need to adjust hedges quickly as contracts roll off. This process can amplify moves in the cash market, especially when sentiment is already fragile.
The timing added to investor caution. The S&P 500 had already closed below its 200-day moving average on Thursday. Many traders use this level to gauge the market’s broader trend. Friday’s continued weakness kept the benchmark under pressure and raised concern about whether stocks can stabilize in the near term.
Investors also showed reluctance to carry aggressive positions into the weekend. Geopolitical headlines can change quickly while markets are closed. This risk likely encouraged more traders to trim exposure, especially in sectors already sensitive to oil prices and inflation concerns.
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