US stocks pulled back on Thursday, pressured by weakness in software shares and a sharp rise in oil prices, as uncertainty surrounding the trajectory of the Iran conflict weighed on investor sentiment.
The S&P 500 declined 0.41% to close at 7,108.40 after touching a fresh intraday record earlier in the session.
The Nasdaq Composite dropped 0.89% to 24,438.50, also retreating from an all-time high, while the Dow Jones Industrial Average fell 179.71 points, or 0.36%, to finish at 49,310.32.
Markets had been buoyed in recent weeks by optimism around a potential resolution to the conflict and a solid earnings backdrop.
However, Thursday’s session reflected a shift in tone, with geopolitical tensions and sector-specific concerns driving volatility.
Software stocks slide on earnings, AI concerns
Technology stocks led the decline, particularly within the software segment, as earnings reports and broader concerns about artificial intelligence disruption weighed on sentiment.
Shares of IBM fell more than 8% despite the company beating expectations on both revenue and earnings, as its decision to maintain full-year guidance disappointed investors.
ServiceNow plunged nearly 18% after reporting that subscription revenue growth was impacted by delays linked to the Middle East conflict.
The weakness spread across the sector. Microsoft dropped 4%, Palantir Technologies lost 7%, and Oracle declined around 6%.
The iShares Expanded Tech-Software Sector ETF (IGV) fell 6%, reflecting broad-based selling pressure.
The earnings results also revived concerns that traditional software business models could face disruption from emerging AI technologies. The S&P 500 software and services index dropped about 5% on the day.
Despite the pullback, the broader earnings season has remained relatively strong, with more than 80% of companies reporting results so far beating analyst expectations.
Oil surge and Iran tensions weigh on sentiment
Geopolitical developments remained a key driver of market direction, with tensions between the US and Iran intensifying.
The conflict has evolved into a naval standoff in the Strait of Hormuz, a critical global shipping route.
Both nations have seized commercial vessels, while Iran has tightened control over the passage and demanded the US lift its blockade on Iranian ports.
President Donald Trump escalated rhetoric during the session, ordering the Navy to “shoot and kill any boat” laying mines along the strait. “There is to be no hesitation,” he wrote.
Oil prices surged in response to the escalating tensions. Brent crude futures settled above $105 per barrel, supported by concerns over supply disruptions and reports of heightened military activity in the region.
Prices also moved higher following a report from Israeli broadcaster N12 that Iran’s parliament speaker, Mohammad Bagher Ghalibaf, had resigned from the negotiating team, raising fears of increased influence from the Revolutionary Guard. Additional reports indicated that air defenses were activated in Tehran amid suspected drone activity.
The rise in oil prices has kept inflation concerns in focus, adding another layer of pressure for equity markets.
Markets struggle to find direction amid mixed signals
Thursday’s pullback highlights the challenges facing investors as markets balance strong earnings with geopolitical and macroeconomic risks.
Economic data offered a mixed picture. Weekly jobless claims rose modestly but remained at levels consistent with a stable labour market. Meanwhile, business activity showed some improvement, although driven in part by stockpiling amid concerns over supply disruptions and rising costs.
Elsewhere, individual stock moves added to volatility. Tesla shares declined after the company increased its spending plans, while Avis Budget shares plunged about 50% over two days following a sharp rally. Texas Instruments, however, rose after issuing an upbeat forecast.
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