Wall Street's three main indexes closed down Friday amid a sudden setback in the U.S. labor market and a 12% spike in U.S. oil prices due to the escalating conflict in the Middle East.
A disappointing payrolls report intensified worries that the U.S. economy could be cooling just as geopolitical tensions in the Middle East push energy costs sharply higher.
That mix threatens to box in the Federal Reserve, complicating its path to rate cuts and reviving concerns about renewed inflation pressure.
"It's a one-two punch for the stock market today: the weak jobs report and the escalating price of oil," said Kristina Hooper, chief market strategist at financial firm Man Group in New York.
Oil prices jumped, driven by the U.S.-Israeli military attack in Iran, which halted shipping through the Strait of Hormuz, and by warnings from Qatar that crude could surge to $150 a barrel.
U.S. crude oil futures climbed more than 12% on Friday, to more than $90 per barrel, while international Brent rose about 8.5% to $92 per barrel, quickly approaching the $100 psychological barrier that alarms markets.
"We are marching closer each day to $100 a barrel of oil, and that has caused much greater volatility and anxiety," said Michael Arone, chief investment strategist at State Street Investment Management.
The Cboe Volatility Index, Wall Street's most watched gauge of investor anxiety, rose to a near five-month high, gaining about 4 points to 28.2, signaling heightened worries about more stock market pain in the near term.
The increase in oil prices fueled expectations of higher input costs and pressure on corporate profits, adding to the likelihood of weaker credit conditions, which is typically negative for lenders.
The S&P 500 Banks Index, which tracks the performance of major U.S. bank stocks within the S&P 500, fell.
BlackRock’s decision to limit withdrawals from a major private credit fund after a spike in redemption requests added to those concerns, echoing similar limits at Blackstone earlier in the week.
Signs of a weakening U.S. jobs market came amid a strike by healthcare workers and harsh winter weather. The unemployment rate increased to 4.4%.
Traders pulled forward bets for a 25-basis-point interest rate cut by the Federal Reserve, with odds at about even for June, from about 35% earlier in the day, according to LSEG-compiled data.
According to preliminary data, the S&P 500 lost 91.64 points, or 1.33%, to end at 6,739.88 points, while the Nasdaq Composite lost 361.31 points, or 1.59%, to 22,387.68. The Dow Jones Industrial Average fell 447.12 points, or 0.93%, to 47,507.62.
Lender Western Alliance fell after suing Jefferies for not making a payment for loans tied to bankrupt auto parts supplier First Brands Group. Jefferies also dropped.
Among other stocks, chip company Marvell Technology jumped after forecasting fiscal 2028 revenue above estimates.
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