US–Iran war news: S&P 500, Dow Jones and Nasdaq reaction: The S&P 500 fell 0.43%, the Dow Jones dropped 1.05%, and the Nasdaq slid 0.92% within hours of confirmed U.S.–Israel strikes on Iran. Dow futures sank another 622 points in extended trade. At the same time, oil prices jumped and gold surged nearly 2%, signaling a classic risk-off move across global markets. This is the immediate market reaction to the escalating US–Iran war news.
Investors are now asking a direct question: How will the stock market react next? In the short term, equities face pressure. In the medium term, defense stocks could rally. In the long term, recurring military contracts may keep cash flowing long after the conflict ends.
WTI crude climbed to $67.29. Brent rose to $72.64. Gold traded at $5,296.50 after an 11% February surge, its strongest monthly gain since 2012. Bitcoin dropped below $64,000, offering a real-time gauge of investor fear. Markets are repricing geopolitical risk quickly and aggressively.
Three signals will determine whether this market shock is temporary or structural. First, the scope of Iran’s retaliation — strikes on U.S. Gulf bases suggest this escalates further before it stabilizes. Second, whether the Strait of Hormuz faces any operational disruption — that single variable could send oil past $90 and deliver a lasting inflation shock. Third, how equity futures open Sunday night, particularly Dow and Nasdaq futures, which are already pricing in significant risk.
Defense stocks will likely rally Monday. Gold has already rallied. Crypto has already sold off.
Why are the S&P 500, Dow Jones, and Nasdaq falling on US–Iran war news?
Stock markets dislike uncertainty. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite all reacted immediately to the military escalation confirmed by Donald Trump.
Investors moved into safe-haven assets. U.S. Treasury yields hovered near 3.95% for the 10-year. The Japanese yen and Swiss franc strengthened. Gold rallied sharply. Higher oil prices also matter. Iran controls key oil chokepoints, including the Strait of Hormuz. If crude spikes further, inflation expectations could rise again. That complicates Federal Reserve policy and pressures growth stocks, especially on the Nasdaq.
In the short term, expect volatility. Historically, geopolitical shocks create sharp but often temporary equity drawdowns unless energy supply is severely disrupted.
Will defense stocks rally after the Iran strikes?
Defense stocks are likely early winners. Companies such as Lockheed Martin, RTX, and Northrop Grumman tend to rise when military tensions escalate.
However, the story goes deeper than a short-term spike. Modern defense spending is no longer just about selling jets or missiles. It is about decades of maintenance, upgrades, logistics, and software support.
The U.S. Government Accountability Office estimates that operating and support costs account for roughly 70% of a major weapons system’s lifetime cost. That means recurring revenue. Not one-off sales.
For example, the F-35 program represents about 26% of Lockheed Martin’s net sales. But much of that revenue includes long-term maintenance and modernization. By the end of 2025, Lockheed reported a $194 billion backlog. RTX reported backlog near $268 billion. Northrop Grumman stood around $95.7 billion.
Wars end. Maintenance contracts do not.
How are oil, gold, and safe-haven assets reacting?
Energy markets reacted instantly. WTI crude and Brent crude both climbed as traders priced in supply risk. Iran remains a major oil producer and controls vital shipping lanes.
Gold rose to over $5,296 per ounce. It already gained nearly 11% in February, marking its biggest monthly jump in more than a decade. Investors clearly rotated into safety.
U.S. Treasurys also attracted demand. That suggests capital preservation is now priority over growth chasing.
When oil and gold rise together during geopolitical conflict, equity markets usually remain cautious.
Could this conflict trigger a deeper stock market correction?
The answer depends on duration and escalation. If strikes remain limited, markets may recover quickly after the initial shock. Historically, geopolitical events rarely cause prolonged bear markets unless they severely disrupt global supply chains or energy flows.
However, if crude oil spikes above recent highs near $78 per barrel or shipping lanes close, inflation could surge again. That would pressure the S&P 500 and especially tech-heavy Nasdaq stocks.
Defense stocks may outperform during such a scenario, but broader indexes could remain under pressure.
Why recurring defense revenue matters more than war headlines
There is a structural shift happening inside the defense industry. It increasingly resembles a subscription business.
Once fighter jets, missile systems, and surveillance platforms are deployed, governments must fund decades of maintenance, software updates, spare parts, and system integration.
Companies like Palantir Technologies also operate in the defense software layer. Multi-year government contracts create recurring revenue streams tied to data analytics and AI-driven military systems.
This means earnings durability is improving across the sector. Investors may still price defense stocks as cyclical trades. But recurring backlog data suggests stronger long-term cash flow visibility.
That changes valuation assumptions.