The Nasdaq Composite fell nearly 2.4% on Thursday, officially crossing into correction territory with a 10% decline from its record high. The Dow Jones Industrial Average dropped 300 points and briefly entered its own correction before clawing back slightly. The S&P 500 sank more than 1%, putting the broad market index on course for its fifth straight weekly loss, a streak not seen since 2022. This was Wall Street’s worst single session since the Iran war began on February 28, and the selling showed no signs of exhaustion heading into Friday.
The catalyst is no longer a mystery. Brent crude futures with May delivery rose 2.7% to $110.94 per barrel on Thursday, driven by fresh disruptions in the Strait of Hormuz. Two Chinese-flagged vessels were turned away from crossing the waterway early Friday morning. A Thai cargo ship that had been struck in the strait ran aground. Iran’s Islamic Revolutionary Guard Corps reiterated through state media that any unauthorized movement through the strait would face “a harsh response.” This is not a theoretical supply crisis. This is an active, daily chokepoint on 20% of the world’s oil supply.
Trump Extends His Iran Deadline, But Markets Aren’t Buying It
President Trump extended his Friday deadline to strike Iran’s energy infrastructure by 10 days to April 6, a move that was supposed to calm markets. It didn’t. The extension reportedly came at Iran’s request, in exchange for allowing 10 oil tankers to pass through the Strait of Hormuz as what one senior administration official described as a “goodwill present.” But 10 tankers moving through a waterway that normally handles hundreds of daily transits is not de-escalation. It is a hostage negotiation with a thin coat of diplomatic paint.
The problem for investors is clear: even a best-case resolution on April 6 doesn’t erase the structural damage already done. Global oil supply has been disrupted by at least 10 million barrels per day since mid-March, according to the International Energy Agency. The IEA has called this the “greatest global energy and food security challenge in history,” which is not the kind of language that gets walked back when a few tankers slip through. Goldman Sachs raised its oil price forecasts, expecting Brent to average $110 in March and April, with WTI estimates at $98 and $105 respectively. Those numbers assume the Strait eventually reopens. If it doesn’t, the ceiling is much higher.
Consumer Sentiment Just Cratered, And That’s Before The Full Pain Hits
The University of Michigan’s final consumer sentiment reading for March came in at 53.3, down from 56.6 in February and well below the 55.5 that economists expected. That’s a 5.8% monthly decline, placing current sentiment in the bottom 1st percentile of the survey’s entire history. The mood darkened most sharply among wealthier consumers, whose portfolios have absorbed a roughly 6% market decline this month alone. But the pain is spreading. Gas prices are spiking at pumps across the country, grocery costs are rising as energy-intensive supply chains adjust, and the uncertainty about how long this conflict lasts is doing what uncertainty always does: freezing spending.
The survey director attributed the decline to two forces working in tandem: the war’s direct impact on energy prices and consumers’ fear that higher costs will become permanent. One-year inflation expectations climbed again, reinforcing a narrative that the Federal Reserve will face mounting pressure to act. And here’s where it gets genuinely concerning for markets.
Rate Hike Probability Just Crossed 50%. Let That Sink In.
On Friday morning, futures traders pushed the probability of a Federal Reserve rate increase by the end of 2026 to 52%. Six months ago, the consensus was that the Fed would be cutting rates throughout the year. The complete reversal of that narrative is one of the most dramatic shifts in interest rate expectations in recent memory. If the Fed is forced to hike into an oil shock, the playbook gets ugly fast: higher borrowing costs collide with slowing growth, corporate earnings compress, and the consumer, already spooked, pulls back further.
This is the stagflation scenario that economists have been warning about since the conflict escalated. Rising energy prices are inherently inflationary, but they also function as a tax on consumption and business activity. The Fed can fight inflation by raising rates, but doing so would accelerate the slowdown. It can support growth by holding steady, but that risks letting inflation expectations become unanchored. There is no good option. There is only a choice between bad and worse, and the market is starting to price in the possibility that the Fed chooses bad.
Tech Valuations Are Taking The Hardest Hit
The Nasdaq’s correction isn’t just about oil. It’s about what oil does to the entire growth stock thesis. Tech companies are valued on future cash flows, and those cash flows get discounted more heavily when interest rates rise. A 50-basis-point rate hike would compress valuations across the sector, hitting the highest-multiple names hardest. Companies trading at 30x, 40x, or 50x forward earnings suddenly look much more expensive when the risk-free rate moves materially higher. The AI trade, which has been the primary driver of market gains over the past two years, is particularly vulnerable because so much of its value is priced on earnings that won’t materialize for years.
Enterprise software stocks are already down 30% over three months on AI disruption fears. Add rising rates to the mix and you get a sector that’s being squeezed from both directions: disrupted business models and a less forgiving valuation environment. The companies with real revenue, real margins, and near-term cash flows will survive. The ones running on narratives and promises will get repriced violently.
What Happens Next Depends On April 6
The market is now trading on a binary outcome with a 10-day fuse. Either the United States and Iran reach some framework for de-escalation by April 6, or Trump follows through on his threat to strike Iran’s energy infrastructure, which would almost certainly push oil well past $130 and trigger a full-blown global recession. The 15-point peace proposal reportedly being discussed gives both sides enough room to claim victory, but the history of Middle East diplomacy is not exactly filled with last-minute breakthroughs.
For investors, the calculus is straightforward. If you believe a deal gets done, this selloff is a buying opportunity. Energy stocks will give back gains, tech will bounce, and the rate hike narrative fades. If you don’t believe a deal gets done, there is significantly more downside from here. The S&P 500 is roughly 8% off its high. In past oil shocks, the average peak-to-trough decline has been closer to 20%. That math suggests the market is pricing in a negotiated outcome with maybe 60% confidence. Whether that confidence is justified is the multi-trillion dollar question that will define the next two weeks.
Friday’s session will set the tone. If oil holds above $110 and equities continue to bleed, expect the “fifth straight weekly loss” headline to dominate financial media all weekend. And expect Monday morning to be rough.
