US stocks sold off on Tuesday after Israel and US jets launched new strikes on Iran, as the widening conflict stoked worries about a drawn-out regional war.

The S&P 500 (ES=F) slid down by roughly 1.6%, while the Dow Jones Industrial Average (^DJI) and Nasdaq Composite (^IXIC) both dived a steeper 1.8% as oil prices continued to rally on concerns about blocked supply.

The fresh wave of Israeli-led attacks has jolted markets that on Monday mostly managed to shake off the initial shock of the outbreak of US-Iran hostilities. The major US gauges staged a comeback from that day's steep intraday losses to close mostly higher, as dip-buyers stepped in.

The air strikes on Iran and Lebanon intensify a conflict that Wall Street expects to pressure global markets. The focus is now on Tehran's response after Iran targeted oil infrastructure and other targets across a huge swathe of the region, with at least nine countries reporting hits.

President Trump fueled fears that the US would be drawn into a prolonged war, as he refused to rule out putting American boots on the ground. “Whatever the time is, it’s OK — whatever it takes,” Trump said. “Right from the beginning, we projected four to five weeks. But we have the capability to go far longer than that.”

Crude prices (BZ=F, CL=F) continued to rise on concerns of disruption to key supply routes, up over 8.5% as inflation worries grew. Meanwhile, gold (GC=F) prices turned lower after a four-day rally, slipping more than 3%.

Beyond geopolitics, investors are watching corporate earnings. Shares in Target (TGT) rose in premarket after the retail giant posted lackluster holiday and full-year sales that met Wall Street estimates. Results from Ross Stores (ROST), AutoZone (AZO), and Best Buy (BBY) are also on Tuesday's docket.

The US stock market slid deeply into the red on Tuesday after the US and Israel began a new barrage of attacks against Iran, and a widening conflict turned up nerves about a drawn-out regional war.

The Nasdaq Composite (^IXIC) led the retreat, losing roughly 1.9%, while the S&P 500 (^GSPC) and the Dow Jones Industrial Average (^DJI) saw slightly leaner drops of 1.6% and 1.7%, respectively, as oil prices rallied further on concerns about blocked supply and, increasingly, threats to production.

Crude prices (BZ=F, CL=F) began to climb again as key supply routes remain blocked and Iranian attacks widened out to include Middle East energy infrastructure, gaining over 6% as inflation worries grew. Meanwhile, gold (GC=F) prices turned lower after a four-day rally, slipping 2%.

In the corporate world, shares in Target (TGT) rose in premarket after the retail giant posted lackluster holiday and full-year sales that met Wall Street estimates.

It's a sea of red in foreign stock markets and foreign exchange-land this morning, as my colleague Jake Conley has been writing. Investors pricing in higher energy costs, lower risk appetite, and a more expensive dollar are unwinding many of the most profitable trades of the last year.

After a decent drubbing on Friday and being closed for a holiday Monday, the iShares MSCI South Korea ETF (EWY) is sinking 12% this morning — the most since 2020. (It has still tripled from the April 2025 post-Liberation Day lows.)

Korea is heavily leveraged to the chip trade, which is also getting repriced (to the downside) this morning.

Micron (MU), Sandisk (SNDK), and Lumentime (LITE) are off 6%, while Western Digital (WDC), ASML (ASML), and Taiwan Semi (TSM) are down 5%.

Having said that, the Philly semiconductor index (^SOX) is set to open about 8% from its record high, just above the 50-day moving average at the 336 level. That's one to watch as the day develops.

Global currencies swung widely this morning as foreign exchange traders priced in the effects of what has become an increasingly broad supply-side inflationary shock.

EUR/USD −0.73%, GBP/USD −0.65%, USD/CHF +0.81%, USD/JPY +0.23%, USD/CNH +0.23%

The dollar is gaining not only on an index basis but against a basket of other currencies as the market assesses that the US is less exposed to direct physical supply disruption, though not immune.

Meanwhile, Europe's currencies are taking the brunt of the blow in the foreign exchange market. Europe remains heavily reliant on imported liquefied natural gas (LNG), including significant flows from Qatar, and the country's production stoppage of LNG has sent European Title Transfer Facility (TTF) gas prices (TTF=F) soaring by more than 85% over the past five sessions.

Unlike a typical geopolitical shock that drives flows into government bonds, this episode has seen yields rise as traders price in higher inflation and fewer central bank rate cuts.

Emerging market currencies tied to energy imports are also under pressure. Egypt’s pound breached a key sympathy level of 50 per dollar as investors brace for prolonged regional instability, and predictions of a South African interest rate hike later this month are surging after predictions as recently as Friday that South Africa's central bank would cut rates at its upcoming March meeting.

Best Buy (BBY) stock jumped as much as 12% in premarket trading despite the retailer reporting a surprise sales slump in its key holiday shopping season.

Same-store sales declined 0.8% in the fourth quarter, the company said Tuesday. Wall Street had hoped for a 0.2% increase after two straight quarters of positive growth.

\\"Our data sources show our overall market share was at least flat, pointing to slightly softer customer demand for our industry during the holiday quarter,\\" Best Buy CEO Corie Barry said in the release.

Best Buy expects first quarter same-store sales to return to growth, rising 1%.

Revenue for the fourth quarter totaled $13.81 billion, less than the $13.88 billion Wall Street had expected, per Bloomberg consensus data. Adjusted earnings per share came in higher at $2.61, more than the $2.46 the Street predicted. Best Buy stock is down more than 30% in the past year.

For the full year, revenue came in at $41.69 billion, just below the $41.76 billion Wall Street predicted. Adjusted earnings per share came in at $6.43, $0.12 above Wall Street's estimates for $6.31.

For the year, same-store sales grew 0.5%, less than the 0.9% increase Wall Street was looking for.

Bloomberg reports:

Oil surged for a second day as the US and Israel stepped up their war against Iran, with a fire at a key storage hub in the United Arab Emirates underscoring the risk to energy supplies.

Global benchmark Brent spiked above $85 a barrel for the first time since July 2024. Falling debris from an intercepted drone caused a major fire at the UAE oil hub of Fujairah. Civil defense units are working to bring the blaze under control, the Fujairah Media Office said in a post on X.

As the second working day of the week begins, there’s little sign of the situation in the Middle East calming. Almost no traffic is sailing through the key Strait of Hormuz and traders’ focus is turning to the vast array of energy infrastructure in the region. While Hormuz handles about a fifth of the world’s oil, the Middle East is also home to about 10 million barrels a day of refining capacity and diesel prices were soaring on Tuesday.

Global energy markets have been upended by the quick spread of the war as Iran sought to retaliate against Israel and states hosting US forces. President Donald Trump said the US would do “whatever it takes” to achieve its goals and Secretary of State Marco Rubio said the military campaign was set to intensify. Qatar said Iran targeted sites across its territory that weren’t limited to military interests.

Tuesday brought more reaction from buyers. China — the world’s largest oil importer — called on all sides in the war to ensure the safe passage of ships through the Strait of Hormuz. Indonesia said it will source part of its crude from the US as an alternative to shipments from the Middle East.

Read more here.

There will be a lot of pomp and circumstance for Target (TGT) today. At the same time as the retailer puts out its earnings release, it’s holding its annual investor day in its backyard of Minneapolis.

I think the company — now led by a new CEO, Michael Fiddelke, and an almost entirely new leadership team — will hype its store investment plans and say that 2025 results will be a low-water mark.

Execs will probably use today’s earnings beat and call out of positive sales in February to help their pitch to Wall Street (and investors more broadly, who have been burned badly by the stock in the past five years).

All of that said, I am not taking the bait, and you shouldn’t take it either. Target should stay in the penalty box and is a \\"prove it\\" stock. That means until it starts stacking positive quarters, you just don’t buy the stock and continue to favor Walmart (WMT) or Costco (COST) on pullbacks.

Here’s what I didn’t like from Target’s quarter to underscore my point:

Fourth straight quarter of falling customer transactions (aka traffic).

Comparable sales fell 2.5%. Walmart US saw a comp gain of 4.6%.

Full-year sales guidance for increases is way too optimistic, given the challenges of the company and fresh consumer uncertainty brought on by the war against Iran (which could weigh on consumer sentiment).

Markets provided an initial response to the war in Iran, with the impact on oil prices and inflation at the forefront, writes Yahoo Finance's Hamza Shaban.

He writes:

After the incursion in Venezuela, President Trump turned his sights on Iran.

This time, Iran's retaliation has changed the calculus, putting the situation in uncharted territory — something investors do appear to be acutely aware of. Markets provided an initial response to the war in Iran, with the impact on oil prices and inflation-related trades at the forefront.

... A multicountry shooting war is as serious as it gets for geopolitical risk. But the stock market's initial response was telling on Monday, opening in the red, before waving off concerns and closing in the green.

The president said US attacks in Iran could last another month or more. Meanwhile, investors are merely adding \\"Iran\\" to a growing list of narratives and catalysts to monitor, along with trade policy following the Supreme Court decision and the myriad AI threads.

But global conflict has its own set of winners and losers. And as investors look to what's next for the operation in Iran, the economic effects are beginning to reverberate.

Here are the three biggest questions about the Iran conflict.

Shares in Target (TGT) popped before the bell after the retail giant's Q4 and 2025 sales dropped, but met Wall Street expectations.

Yahoo Finance's Brooke DiPalma reports:

Target (TGT) posted lackluster fourth quarter and full-year results on Tuesday, capping off what the company called a \\"challenging year\\" as new CEO Michael Fiddelke looks to turn around results for the struggling retailer.

Target said Tuesday its same-store sales fell 2.5% during the holiday quarter and 2.6% for the full year. Both declines were in line with Wall Street expectations, according to Bloomberg forecasts.

In the fourth quarter, its in-store sales fell 3.9% while digital sales rose 1.9%. Revenue in the quarter fell 1.5% from last year to $30.5 billion, above the $29.9 billion that was expected. Adjusted earnings of $2.30 also beat the $2.14 the Street expected.

Fiddelke took the reins as CEO from Brian Cornell on Feb. 1.

“I’m incredibly proud of how our team navigated through a challenging year in 2025, as they focused on serving our guests while positioning our business for profitable growth in 2026 and beyond,” Fiddelke said in a statement. He added the company saw a \\"healthy, positive sales increase\\" last month.

Read more here.

US Treasurys followed other bond markets lower, with traders retreating from bets for interest-rate cuts in response to the potentially inflationary impact of an escalating Iran war.

Bloomberg reports:

The US 10-year yield (^TNX) rose six basis points to 4.09%. The move accelerated at the European open, where comparable UK, French and Italian yields all rose more than 10 basis points. The conflict’s impact on energy supply, which has sent oil and gas prices sharply higher, is key to investor concerns.

Traders further trimmed bets on Federal Reserve monetary easing, now only seeing 43 basis points of cuts this year compared to around 60 basis points on Friday. That follows sharp repricings elsewhere: the market has fully priced out a second Bank of England interest-rate cut this year, while its bias is now for the European Central Bank to hike its key rate.

The moves in US Treasurys are less pronounced than in other bond markets — reflecting the view that US domestic energy production can buffer the economy from global supply shocks — still, it’s an abrupt shift given US bonds are just off their best month in a year. The haven appeal of Treasurys is seen as limited at this juncture, given concerns over inflation.

Read more here.

From Bloomberg:

The US sent conflicting messages about how long a war with Iran might last as Israel launched new airstrikes on Monday, with the widening conflict reverberating across the Middle East and upending energy markets.

Defense Secretary Pete Hegseth rejected the idea of an “endless” war with Iran. But President Donald Trump later insisted there was no fixed timeline. Both refused to rule out putting American boots on the ground.

“Whatever the time is, it’s okay — whatever it takes,” Trump said. “Right from the beginning, we projected four to five weeks. But we have capability to go far longer than that.”

... The Trump administration will soon roll out a program to help mitigate rising energy costs, Secretary of State Marco Rubio told reporters in Washington before heading into a briefing for US lawmakers. He said the campaign would only intensify.

“I’m not going to give away the details of our tactical efforts, but the hardest hits are yet to come from the US military,” Rubio said.

Read more here.

Iranian drone strikes forced QatarEnergy to halt production at Ras Laffan and Mesaieed, effectively taking one-fifth of global LNG export capacity offline in a single geopolitical event.

From Oilprice.com:

On March 2, QatarEnergy — the state-owned energy giant responsible for all of the country’s liquefied natural gas exports — announced a complete halt to LNG production after Iranian drone strikes hit facilities at Ras Laffan Industrial City and Mesaieed Industrial City. And the effects of the shutdown will go well beyond the short term.

These aren’t minor processing units.

These are the heart of Qatar’s LNG infrastructure, and their shutdown effectively removes roughly 20% of the world’s LNG export capacity from the market in one hit.

This is a supply disruption at a scale rarely seen outside of war, siege, or widespread industrial disaster. And it’s happening not because of maintenance or economic shifts, but because of geopolitical conflict. The consequences and potential knock-on effects are massive.

Read more here.

As I mentioned in a prior post, keeping market history in mind during war situations is important.

While the spike in oil (BZ=F, CL=F) prices looks painful (and it is), we haven't seen a worst-case scenario.

That was called out in this chart Deutsche Bank:

You may be wondering why we are seeing Ford (F) and General Motors (GM) sell-off more than the broader market this week. Sure, there is the thinking that with stocks down and with us at war, people put off buying the more expensive cars and trucks each automaker continues to hawk.

But keep this mind. Both automakers have made a hard pivot away from electric vehicles and passenger cars, each being ideal in an environment of sustained higher gas prices (which we may be looking at). Ford especially is really playing up its pickup truck bonafides.

Another surge in oil prices (CL=F, BZ=F) isn't helping market sentiment this morning.

But remember in this backdrop, markets will tend to take their initial cues from the leaders running point on the war (Trump, Hegseth, and so on)

Helpful assessment of this from Mizuho today:

\\"Trump’s 'whatever it takes' on the Iran conflict blows off Hesgeth’s attempts to assuage concerns of a drawn-out war. Given Israel’s declaration of a new wave of strikes, chances are, the US will be drawn into greater and far more perilous engagement. Especially as “leadership decapitation” as a gambit appear to have backfired, resulting in more radicalized/resistant Iranian Revolutionary Guards.\\"

Good point by JP Morgan this morning on bank stocks: Look for a first quarter lift to banks' trading business from increased volatility across many markets from the war on Iran

JPMorgan says (emphasis added):

\\"We see the events in the Middle East having limited direct earnings impact on global banks so far, as, despite being a growth region for most global diversified banks, the overall contribution from the Middle East to Group earnings is currently limited, we believe. As most global banks are wholesale geared rather than domestic retail in the region, we think the impact for global investment bank geared banks from higher volatility is likely to be positive for global trading revenues.\\"

Their top US names to trade off this prospect include Goldman Sachs (GS) and Morgan Stanley (MS), given their outsized trading operations.

Goldman Sachs is calling attention to a pickup in inflation coming soon, given that oil prices are surging.

Its team notes that a 10% increase in crude oil prices typically raises \\"core\\" inflation — which strips out volatile energy and food prices — by 4 basis points and headline inflation by 20-30 basis points.

It's good in these moments, when the market has been punched in the face, to level-set a bit.

Pullbacks on developing war news are normal. But just keep this chart from Keith Lerner at Truist in mind.

Since 2009, the S&P 500 (^GSPC) has seen more than 30 pullbacks of greater than 5%. That suggests stocks can end up resilient in the face of bad news.

Crude oil futures (BZ=F, CL=F) continued to rise on Tuesday as fresh Mideast strikes spurred concerns that hostilities could disrupt key supply routes and reignite inflation pressures.

Bloomberg reports:

Oil extended gains as the US and Israel stepped up their war against Iran, while Tehran vowed a full closure of the Strait of Hormuz and hit the American embassy in Riyadh with drones.

Global benchmark Brent rose above $80 a barrel, after spiking about 7% on Monday, while West Texas Intermediate was near $73. President Donald Trump said the US would do “whatever it takes,” and Secretary of State Marco Rubio told reporters the military campaign was set to intensify.

... Global energy markets have been upended by the war, which erupted on Saturday and then spread across the oil-rich Middle East as Iran sought to retaliate against Israel and states hosting US forces. Oil prices have spiked, along with natural gas and petroleum products such as diesel, potentially fueling a wave of inflation across the world. Coal has also jumped.

“With the Strait of Hormuz still inactive, the clock is ticking,” JPMorgan Chase & Co. analysts including Natasha Kaneva said in a note, flagging scope for some Persian Gulf producers to cut output within weeks if storage fills.

Read more here.

Bloomberg reports:

South Korean stocks slumped as Middle East tensions stoked concern over the impact of rising energy costs, with global funds offloading more than $3 billion of local equities amid a wave of risk-off sentiment.

The benchmark Kospi (^KS11) sank 7.2% in its worst session since August 2024, as the market reopened after a holiday. Chip heavyweights Samsung Electronics Co. (005930.KS) and SK Hynix Inc. (000660.KS) dragged the gauge lower, dropping at least 9.9% each.

A prolonged war could be a major test of the world-beating rally in Korean equities, with the Kospi still up 37% this year. Samsung and SK Hynix powered much of the gains on the back of surging global memory amid the artificial intelligence boom. Tuesday’s drop shaved around $170 billion in combined market cap from the duo, unnerving investors who had jumped into the rally betting the gains will extend.

“An extended conflict involving Iran risks keeping crude prices elevated, reinforcing upside inflation risks and complicating the Federal Reserve’s path toward policy easing,” said Jung In Yun, chief executive officer at Fibonacci Asset Management Global.

“That macro backdrop is weighing on AI-linked equities, where stretched valuations are increasingly sensitive to shifts in rates and liquidity expectations.”

Read more here.

Bloomberg reports:

Gold (GC=F) rose for a fifth day, as the escalating war in the Middle East upended global energy markets and drove investors to safer assets.

Bullion climbed as much as 1.1% to top $5,380 an ounce, adding to a gain of more than 3% over the previous four sessions as conflict reverberated across the region. President Donald Trump said the US would continue its military offensive for as long as it takes, and Israel announced a “wave of strikes” targeting Iran’s command centers. Tehran attacked oil and gas infrastructure and threatened shipping in the strategic Strait of Hormuz.

The resulting spike in energy prices has stoked inflation fears in the US, causing Treasuries to slump and raising the likelihood that the Federal Reserve will leave interest rates unchanged for longer. Traders are now pricing in a rate cut by September, later than previously estimated. While higher rates may weigh on gold as it doesn’t pay interest, they can also reinforce bullion’s role as a better store of value.

Read more here.