US stock futures witnessed sharp falls as the geopolitical tensions in the Middle East reached a fever pitch. Tehran’s rejection of Trump’s invitation to negotiate has jolted Wall Street. Investors, who were optimistic of a de-escalation of the war, are now fumbling in the dark. Iran’s abrupt withdrawal from potential talks has signaled to the markets that the “risk-off” sentiment is likely to persist, as both sides appear to be engaging in a dangerous game of brinkmanship.
As a response to this news, contracts linked to the Dow Jones Industrial Average (YM=F) dropped 420 points, or 0.9%, while S&P 500 futures (ES=F) slid 1.2%. The tech-heavy Nasdaq 100 futures (NQ=F) saw the steepest decline, with it falling by 1.5%. The CBOE Volatility Index (VIX), often called Wall Street’s “fear gauge,” had spiked nearly 18% in early March in pre-market trading.
Iran’s Foreign Ministry officials had recently made their stand clear by dismissing the overtures from the G7 and the CIA to establish a back-channel for mediation. The country has decided to reject any attempts at peace talks following the death of its Supreme Leader, Ali Khamenei, during a series of high-precision U.S. and Israeli strikes.
Issues about Energy Security
The prospects of the escalation of the war will worsen the energy crisis, with Iran closing the Strait of Hormuz for energy supply. It has had its impacts on the market, too. Brent Crude oil futures surged back above $104 a barrel, while West Texas Intermediate (WTI) climbed to nearly $100. The price is expected to surge further if Iran maintains the status quo at Hormuz, as the Strait of Hormuz is a critical chokepoint through which roughly 20% of the world’s oil supply passes.
Even though President Donald Trump has offered to provide escorts for oil tankers to ensure regional stability, it has had zero effect on the crisis. Estimates suggest Brent crude could reach $119 or higher, with some scenarios projecting an increase towards $130-$150 if supply from Gulf producers remains halted.
Investors are Moving to Gold and Bond Markets; Defense Sector Gains
In response to the downfall of the equities market, investors are moving to safe-haven investments like gold and the bond market. Gold is viewed as a classic hedge against currency devaluation and volatility of the equity market. The shift is supported by increasing interest in digital gold and ETFs. Even though the gold prices are on a downward spree due to investors selling off gold to cover the losses in other areas, such as equities, and the US Dollar gaining strength, gold remains a safe haven.
The fight for safety trend was seen on the bond market, too. The 10-Year Treasury yield experienced volatility as it was trading around 4.20% to 4.4% in the latter part of March, with yields dipping at times when investors feared escalating conflict. The 2-Year Treasury Note yield saw increased tension, with reports stating that it hit a 10-month high, exceeding 4% on March 23, 2026, as markets anticipated no rate cuts by the Federal Reserve this year due to elevated oil prices.
The defense sector has gained amidst the broader market decline. Companies like Lockheed Martin and Raytheon trended higher. However, the tech and consumer sectors suffered. Semi-conductor giant Broadcom (AVGO) and enterprise software leader Oracle (ORCL) saw their shares under pressure, as supply chain bottlenecks and concerns over global growth weighed on sentiment.
