As global markets kicked off trading on Thursday, Wall Street braced for modest opening losses, pressured by three overlapping forces: escalating Middle East conflict that sent crude oil prices surging, a record antitrust penalty against a major tech giant, and mixed signals from high-profile corporate earnings reports.
Futures linked to the S&P 500 and the Dow Jones Industrial Average both dropped 0.6% in premarket trading, while Nasdaq futures slid a sharper 0.8%, dragged down by losses in big tech. The steepest early decline belonged to Alphabet Inc., Google’s parent company, which saw its shares tumble 4% immediately after the European Union levied an €890 million ($1 billion) antitrust fine against the firm. EU regulators concluded the tech giant violated digital competition rules by engineering Google Play and its dominant search engine to steer users toward its own native services and apps, effectively shutting out smaller rival competitors. The penalty came just one day after Alphabet reported second-quarter earnings that outperformed Wall Street forecasts, a promising signal that the company’s aggressive, multi-billion-dollar investment push into artificial intelligence may already be delivering returns.
Another high-profile name saw off-hours share losses: electric vehicle maker Tesla, led by Elon Musk, saw its stock drop 5.6% after the company reported that sharply elevated research and development spending offset strong gains from rising vehicle sales, cutting into bottom-line profits. For weeks, investor focus has centered on whether the massive flood of capital flowing into AI infrastructure—from advanced microprocessors to memory chips and other core components of the AI boom—will translate into sufficient long-term profits to justify current valuations. These ongoing concerns have kept AI stocks at the center of Wall Street’s recent volatility, though the sector saw little early movement on Thursday, with most stocks holding near Wednesday’s closing levels.
Defense stocks bucked the broader downward premarket trend, however, after two leading aerospace and defense firms posted blowout quarterly results. Lockheed Martin, the world’s largest defense contractor, beat both sales and profit forecasts, sending its shares up 5.5% in premarket trading. RTX, the manufacturer of Patriot air defense systems and Tomahawk cruise missiles, jumped 5.2% after it easily exceeded analyst targets and raised its full-year guidance.
The most impactful market-moving development on Thursday was the sharp spike in global oil prices, driven by escalating conflict with Iran that has disrupted shipping through the Strait of Hormuz, the world’s most critical energy chokepoint. By early Thursday, Brent crude, the global benchmark for oil, jumped 4.9% to $98.64 per barrel, its highest level since early June. Just earlier this month, Brent had traded below $72 per barrel, roughly matching pre-conflict levels. Currently, about 20% of all globally traded oil and natural gas passes through the narrow strait, and ongoing fighting has blocked many oil tankers from exiting the Persian Gulf. U.S. benchmark West Texas Intermediate crude rose $3.83 to $90.66 per barrel, also hitting a six-week high.
Rising oil prices create cascading pressure across global markets: they push up operating costs for nearly all businesses, erode corporate profits, and encourage more cautious consumer spending, as households pay more for gasoline and energy. Fuel-reliant industries such as airlines are hit hardest by elevated energy prices, and the sector saw broad losses on Thursday. American Airlines fell 3.7% in premarket trading, even after the carrier reported higher-than-expected profits on record revenue. The company warned that third-quarter fuel expenses would be $1.7 billion higher than the same period a year earlier. The selloff dragged down shares of other major U.S. carriers, including Delta Air Lines and United Airlines. Southwest Airlines also reported strong second-quarter results on Thursday, but its shares dropped more than 4% after the airline cut its third-quarter outlook, citing the same headwind of spiking fuel costs.
Beyond the United States, European markets traded lower at midday: Germany’s DAX index lost 0.9%, France’s CAC 40 shed 1.3%, and the FTSE 100 in London fell 0.3%. Most Asian markets closed higher on Thursday: South Korea’s Kospi led gains with a 4.4% jump to 7,096.89, Japan’s Nikkei 225 added 0.5% to 66,422.60, with SoftBank Group leading tech-driven gains by climbing 3.8%. Hong Kong’s Hang Seng Index rose 1.3% to 25,210.81, while China’s Shanghai Composite recovered from early losses to close 0.3% higher at 3,876.78. Australia’s S&P/ASX 200 gained 0.2% to 8,839.00, Taiwan’s Taiex edged up 0.1%, and India’s Sensex closed 0.6% lower. In currency markets, the U.S. dollar traded at 163.36 Japanese yen, with the yen hovering near its weakest level in four decades. Expectations that the gap between U.S. and Japanese interest rates will widen, driven by faster inflation in the U.S., have continued to push the dollar higher against the Japanese currency.
Economists and investors warn that the latest spike in oil prices threatens to reaccelerate global inflation, which could force the U.S. Federal Reserve and other major central banks to keep interest rates higher for longer. Higher borrowing rates slow overall economic growth and typically put downward pressure on valuations for stocks and other risk assets.