US–Iran Tensions Shake Global Markets: Impact on Nasdaq, Dow Jones, and S&P 500

The US and Israel attacked Iran over the weekend, immediately sending investors into risk-off mode. Oil prices surged, gold (XAU) rose and equity futures were down across the board. This uncertainty is enough to weaken confidence in equities, even after a fragile February, which was marked by concerns about the disruption caused by artificial intelligence and the slowness in earnings visibility.

The killing of Iran’s Supreme Leader Ayatollah Ali Khamenei is historic turning point for the region and one that raises serious questions about political stability within Iran. Investors are concerned about retaliation and escalation throughout the Middle East.

Even though the U.S. officials hint that operations are “ahead of schedule,” markets are pricing in risk that this conflict may not end quickly. When geopolitical events create unpredictable outcomes, equity markets tend to react first. They do it by lower futures, higher volatility and rotation into safe-haven assets.

At the same time, the increase in the price of crude oil adds second layer of concern. Higher oil prices are a direct feed into inflation expectations. If fears of inflation return, then expectations for rate cuts weaken. This is a negative loop for equities as higher rates squeeze valuations and slow down demand pressure on corporate earnings.

Elevated Valuations Increase Market Vulnerability

The CAPE ratio for the S&P 500 eased slightly to 39.55 times the last 10 years of inflation-adjusted earnings. Despite this correction, these are the highest readings ever recorded and suggest that investors are paying a lot for each dollar of earnings.

Historically, these high levels appeared before periods of major corrections. The rising oil prices, geopolitical tensions, inflation risks and high CAPE ratio make equities more vulnerable to volatility because valuations leave little margin for negative surprises.

Impact of US–Iran Tensions on US Equity Indices

The reaction in the futures markets indicates how sensitive equities are to geopolitical stress. Dow Jones Industrial Average futures were down 375 points, and S&P 500 and Nasdaq futures were also down. This decline is a classic risk off adjustment. Investors are less willing to invest in equities when uncertainty is high because it becomes more difficult to forecast earnings. War risk makes volatility and volatility decreases the risk appetite.

Dow Jones Under Pressure as US–Iran Tensions Threaten Growth and Margins

The Dow Jones 30 is likely to react via its exposure to industrial, financial and multinational companies. Many Dow components depend on stable global trade flows and predictable levels of economic growth.

A long-term conflict in the Middle East threatens supply chains and also increases input costs due to higher energy prices. That combination puts pressure on profit margins. If oil stays at high level, transport and manufacturing costs increase, which puts pressure on earnings expectations. As a result, Dow stocks tend to experience downside pressure during times of geopolitical crisis, particularly when there are signs of inflation again.

From a technical perspective, the Dow Jones has hit the strong resistance of the 50,000 level within the broadening wedge pattern. The pattern shows a very constructive bullish outlook with an inverted head and shoulders pattern formed in 2022. The formation of a broadening wedge pattern from 2024 to 2025 has introduced strong volatility.

The bottom formed in April 2025 at $36,500 has produced strong support around $35,000 to $38,000. The index is now consolidating around the 50,000 level and looks for next move.

The strong support remains at 45,000 as the US-Iran tensions escalate. A break below 45,000 will take the index toward $38,000. However, a recovery above 50,000 will indicate further upside toward $55,000. It is interesting to note that the index has also reached the RSI around 70, which suggests a correction may develop.

S&P 500 Faces Dual Risk from Rising Oil and Slowing Growth

S&P 500 reflects the broader market, and its reaction reflects both macro and sector-specific fears. The index was already showing weakness in February due to concerns that AI would disrupt traditional business models. The geopolitical escalation adds an additional layer of uncertainty on top of those structural worries.

Investors face two simultaneous risks. The first is the increased inflation due to rising oil prices. The second risk is a possible economic slowdown due to a weakening of business confidence. When these risk factors converge, portfolio managers tend to reduce their positions in cyclicals and shift to defensive areas, which results in broader index weakness.

The weekly chart for the S&P 500 shows strong consolidation at a higher level below 7,000. The overall price structure for the S&P 500 remains strongly bullish, as seen in the bullish pattern formation in 2022 and then the broadening wedge pattern from 2024 to 2026.

The strong support in the index remains at 6,000, whereby a break below 6,000 will take the index toward 5,000. On the other hand, a recovery above 7,000 will indicate further upside toward 7,500. If the S&P 500 initiates a strong correction during this crisis, 5,000 remains the key support level.

Nasdaq Under Pressure as Inflation Fears Weigh on Growth Valuations

Nasdaq is even more sensitive due to its heavy load of growth and technology stocks. Growth valuations are based heavily on future earnings expectations and low discount rates. When geopolitical tensions cause a spike in oil prices and inflation fears emerge, bond yields can be higher. Higher yields decrease the present value of future earnings which directly puts pressure on technology stocks.

The strong volatility in the Nasdaq is also evident in the broadening wedge pattern seen on the weekly chart below. It is observed that the Nasdaq has already reached strong resistance at 25,000, which coincides with the resistance of the broadening wedge pattern.

The index has been consolidating for the past few months around this level and is looking for the next move. In case of a strong correction in the Nasdaq index, the immediate support remains 22,000. However, a break below 22,000 will take the index toward 17,000, which is considered a strong buy point.

The weakness in the Nasdaq index is also observed on the short-term chart, which shows a failure to break above the 26,000 level. The index has formed ascending broadening wedge pattern from August 2025, which indicates strong volatility.

A break below 24,000 will indicate a negative price action. This will break the ascending broadening wedge pattern and initiate a drop toward the neckline of the inverted head-and-shoulders pattern at 22,500.

Equity Markets at a Crossroads as US–Iran Tensions Drive Volatility

Geopolitical tensions between the US and Iran have brought market focus back to risk management. Investors now pay close attention to oil prices and inflation expectations as well as headlines from the Middle East. As energy prices rise and uncertainty in energy policy increases, it leads to a lack of confidence in earnings visibility. This environment indicates increased short-term volatility. As long as the risks of conflict remain high, risk appetite is likely to remain fragile and defensive positioning may dominate market flows.

From technical perspective, the longer-term bullish structures in the Dow Jones, S&P 500 and the Nasdaq are still intact, but near-term corrections cannot be ignored. A break below 24,000, 48,000 and 6,500 in Nasdaq, Dow Jones and S&P 500 will lead to significant corrections. On the other hand, the evidence of de-escalation could recover equities. Therefore, the direction of global markets will depend to a large extent on whether tensions escalate further or move towards diplomatic resolution in coming weeks.