Wall Street Falls as Weak Jobs Data and Middle East Tensions Shake Markets

U.S. stocks fell sharply on Friday as weak labour market data and escalating tensions in the Middle East unsettled investors.

The major indexes on Wall Street declined, with the Dow Jones Industrial Average dropping to its lowest level in more than three months. Fresh data showed the U.S. economy unexpectedly lost jobs in February, while the unemployment rate rose to 4.4%, signalling potential cracks in the labour market. Analysts attributed part of the slowdown to a strike by healthcare workers and severe winter weather in several regions.

The weak employment report prompted traders to reassess expectations for interest rate cuts by the Federal Reserve. Market participants now see a stronger possibility of a 25-basis-point rate cut by June, compared with roughly 35% odds earlier in the day, according to data compiled by London Stock Exchange Group.

Jeff Schulze, head of economic and market strategy at ClearBridge Investments, said the deteriorating labour market outlook has brought forward expectations of policy easing.

“Given the developments in the Middle East and the spike in energy prices, I initially thought the first rate cut might come in September. But the renewed weakness in the labour market brings both sides of the Fed’s mandate — inflation and employment — into focus. A July cut now looks more likely,” he said.

Oil surge adds to market jitters

Investor anxiety also grew as the conflict in the Middle East disrupted energy markets. Oil prices surged the most this week since the Russian invasion of Ukraine, with shipping through the strategic Strait of Hormuz reportedly coming to a halt.

Benchmark Brent crude briefly touched $90 per barrel, raising concerns that higher energy costs could push inflation upward again. The spike in fuel prices weighed heavily on airline stocks, with the S&P 500 passenger airlines sub-index heading for a steep weekly decline.

Energy supply fears also intensified after Qatar indicated that restoring normal natural gas shipments could take weeks or even months even if a ceasefire is reached soon. Some reports warned that Gulf energy exporters could suspend shipments within weeks if tensions escalate further, potentially pushing oil prices toward $150 per barrel.

Markets broadly lower

By late morning in New York, the Dow Jones Industrial Average had fallen more than 570 points, while the S&P 500 and the Nasdaq Composite also traded lower. Losses were broad across sectors, with banking stocks under pressure amid renewed concerns about the private credit market.

Shares of BlackRock dropped after the asset manager limited withdrawals from a major private credit fund following a surge in redemption requests, echoing a similar move earlier in the week by Blackstone.

Meanwhile, Western Alliance Bancorporation tumbled sharply after filing a lawsuit against Jefferies Financial Group over unpaid loans tied to the bankrupt auto-parts supplier First Brands Group. Investor anxiety was also reflected in the CBOE Volatility Index, often referred to as Wall Street’s “fear gauge,” which climbed to a four-month high.

A few bright spots

Despite the overall negative sentiment, some stocks bucked the trend. Semiconductor firm Marvell Technology surged after projecting stronger-than-expected revenue growth by fiscal 2028.

Even with Friday’s decline, U.S. markets have still performed relatively better this week than several Asian and European peers. Analysts say the country’s status as a net oil exporter and continued strength in technology stocks have provided some cushion against global volatility.

Gary Schlossberg, global strategist at Wells Fargo Investment Institute, said safe-haven flows into the dollar and U.S. assets had helped stabilise markets earlier in the week. Meanwhile, Christopher Waller, governor at the Federal Reserve, said in a television interview that the recent surge in oil prices may not necessarily lead to sustained inflation or require a shift in monetary policy.

Still, market breadth remained weak, with declining stocks significantly outnumbering advancing ones on both major U.S. exchanges.