Oil prices are again setting the tone for U.S. equities. Wednesday’s session showed how an energy spike can split the tape: the Dow sold off hard while the Nasdaq still found buyers in chips.
According to CNBC, the Dow dropped 576.76 points, or 1.1%, in regular trading. The S&P 500 fell 0.28%. Both indexes were weighed down by a spike in oil prices. Meanwhile, the Nasdaq Composite rose 0.2%, aided by Nvidia and other chip stocks.
West Texas Intermediate and Brent had already jumped more than 4% on Wednesday. Early Thursday, Brent for September advanced 1.03% to $78.82 a barrel. WTI for August rose 1.06% to $74.29. Therefore, oil prices stayed elevated even as equity futures tried to stabilize.
What drove oil prices and the equity split
President Donald Trump said the ceasefire with Iran is “over.” He also signaled he may no longer want to negotiate a deal. U.S. Central Command said fresh strikes on Iran followed Tehran’s attacks on commercial shipping near the Strait of Hormuz. As a result, traders priced a thicker geopolitical risk premium into crude.
Mason Mendez, global real assets analyst at Wells Fargo Investment Institute, told CNBC that any assumption of a swift return to normalized Persian Gulf exports is being challenged. He said low global reserves and inventories mean further escalations can reinforce a higher risk premium in oil prices — even when talks resume later.
Investors also feared that rising energy costs could reignite inflation. That would keep the Federal Reserve tighter for longer. Minutes from the Fed’s June meeting underscored the split. Officials were reluctant to cut until inflation clearly moves toward target.
Axo Markets read: why oil prices hit cyclicals first
For Markets desks, Wednesday was not a simple risk-off day. Instead, it was a relative-value day. Energy-sensitive cyclicals and Dow industrials absorbed the oil shock. Growth and AI-linked names still bid. That split matters more than the headline index print.
Oil prices transmit into equities through two channels at once. First, higher crude raises input costs and can compress margins outside energy. Second, higher energy feeds inflation expectations and lifts the odds of a hawkish Fed path. The Nasdaq’s gain shows that AI earnings momentum can still offset that rate fear — at least for one session.
Wells Fargo’s Mendez still sees strong equity earnings and AI strength driving the S&P 500 toward a year-end range of 7,800 to 8,000. However, he also said oil prices will stay top of mind near term. Renewed geopolitical risk can fuel risk-off sentiment even if the longer bull case holds.
What to watch next for oil prices
Early Thursday, S&P 500 futures were 0.13% higher. Dow futures were up about 70 points, or 0.1%. Nasdaq 100 futures advanced 0.1%. Traders will watch weekly jobless claims at 8:30 a.m. ET and existing home sales at 10 a.m. PepsiCo also reports before the bell.
Finally, watch Hormuz shipping headlines and whether oil prices keep climbing after Wednesday’s more-than-4% surge. If crude stays elevated and Fed hike odds firm, Dow cyclicals may keep lagging chips. If flows normalize and oil fades, the equity split can close quickly. Cross-check WTI, Brent, and front-end Treasury yields for the cleanest read on which channel is winning.