A swoon in US stocks has left technology giants on the brink of a correction as the war in Iran drives up oil prices and sparked inflation worries.

Bloomberg's gauge of Magnificent Seven companies — which includes titans like Nvidia Corp., Apple Inc. and Tesla Inc. — dropped 1.6% at 2:05 p.m. in New York, and is down nearly 10% from its October peak.

The group briefly tumbled into a correction earlier this month, but has yet to close below that level. The declines weighed on the Nasdaq 100 Index, pushing it down 1.4%.

"The Magnificent Seven have had multiple episodes over the past few years where their valuations/price levels get ahead of fundamentals and then they spend months working off the exuberance," said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute. "We have been in one of these periods since last October, and seem to be close to the end."

The S&P 500 Index dropped 1.2%, putting it on track to extend declines for a third-straight session. Brent crude jumped 7.7% to $99.05. As a result of rising oil prices, bond traders are no longer pricing in an interest-rate cut from the Federal Reserve this year.

Iran's Supreme Leader Mojtaba Khamenei and President Donald Trump both struck defiant tones as the war entered its 13th day. Khamenei said the critical Strait of Hormuz should remain closed and that Tehran would open other fronts in the war should attacks against the country persist.

Trump, meanwhile, said stopping Iran from having nuclear weapons and threatening the Middle East was of "greater interest and importance" to him than the cost of oil.

Khamenei's message "is a substantial headwind for an investor community that had hoped the battle would end promptly," José Torres, senior economist at Interactive Brokers said. "The negative impacts on corporate margins, inflation expectations, rate-cut prospects and yields are sparking market volatility, leaving participants with few places to hide."

The UK Navy said three commercial vessels were struck within the Arabian Gulf in the past 24 hours, suggesting a broadening of attacks beyond the Strait of Hormuz. Shortly before, UK Defense Secretary John Healey said it is becoming evident that Iran is laying mines in the Strait of Hormuz.

"There are few signs that either side wants to back down," said Dec Mullarkey, managing director at SLC Management. He expects oil to hit all-time highs if shipping has not resumed by the end of March. "Developments over the next few weeks seem pivotal for the prospects of much higher energy prices and ultimately food prices as farmer planting season begins."

Tariffs and Credit

Traders are also paying attention to the latest development on the tariff front. The Trump administration has started the first of several trade investigations, setting the stage for levies that will replace the ones struck down. China, the European Union and Japan are among the major economies subject to a probe.

"We would expect these initial 301 investigations to result in tariffs," TD Cowen's Chris Krueger wrote in a note Thursday. Ultimately, he expects around 60 countries could be involved in the probes being conducted under Section 301 of the Trade Act.

Concern over private credit is continuing to have an impact on alternative asset managers and big banks, with Morgan Stanley and Cliffwater LLC capping withdrawals from their multibillion-dollar private credit funds. While there is no question that war in the Middle East is the main issue facing markets currently, credit also carries importance, Miller Tabak's Matt Maley said.

In individual stock moves, Bumble Inc. soared 33% after the online-dating firm delivered an upbeat outlook and unveiled an artificial intelligence-powered assistant to act as a personal matchmaker. Dollar General Corp. tumbled 5.9% after the retailer's in-line sales forecast disappointed investors and slowed momentum for a company that had routinely exceeded Wall Street estimates.

Lucid Group Inc. dropped 6.7% after the electric-vehicle company hosted an investor day. Stryker Corp. fell 1.7% as the medical technology firm continued to struggle with addressing a crippling hack claimed by a group linked to Iran.

Sectors to Watch

  • - CF Industries Holdings Inc. jumped 13% to hit a record high, while Mosaic Co. gained 8.2%, as fertilizer stocks rise amid the war and disruptions to the Strait of Hormuz tightening supply 
  • - Energy stocks jumped 1.6% and chemical names advanced 2.1% as the Middle East conflict continued; passenger airlines plunged 3.5% due to rising costs stemming from higher crude prices
  • - Financials stocks tumbled 1.5% as alternative asset managers and big banks fell after Morgan Stanley and Cliffwater LLC capped withdrawals from their multibillion-dollar private credit funds
  • - Packaged food companies declined 1.2% after General Mills Inc., Conagra Brands Inc. and Campbell's Co. were all downgraded to underweight at Wells Fargo
  • - Consumer staples stocks rose 0.3%, with Kroger Co. being among notable gainers, amid fears the war in Iran will further crimp energy supplies and fuel inflation.

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