The S&P 500 Index ($SPX) (SPY) closed down just -0.02% on Thursday, while the Dow Jones Industrial Average ($DOWI) (DIA) dropped -0.31%, dragging it to a one-week low.

The Nasdaq 100 Index ($IUXX) (QQQ) managed a marginal gain of +0.03%, even as December E-mini S&P futures (ESZ26) fell -0.10% and December E-mini Nasdaq futures (NQZ26) slipped -0.03%.

A sharp surge in crude oil prices drove inflation fears across global markets, pushing bond yields to levels not seen in decades.

WTI crude rose more than +2% after a senior member of Iran’s Revolutionary Guard Corps warned that Iran may expand the war to the Indian Ocean if the US or Israel attacks again.

Saudi Arabia also came under assault on Thursday, saying it intercepted missiles fired by Iran-backed Houthi rebels toward the Red Sea port of Yanbu and the city of Taif.

Crude prices later retreated from session highs after a Reuters report indicated that US and Iranian negotiators are exploring a phased deal that would see Iran reopen the Strait of Hormuz and the US lift its blockade of Iranian ports, with Qatari officials mediating the talks.

The oil-driven selloff in global bond markets was severe, with the 10-year T-note yield climbing to a 19-year high of 5.22%, the German 10-year Bund yield rising to a 17-year high of 3.62%, and Japan’s 10-year JGB bond yield soaring to a 30-year high of 3.09%.

Hawkish signals from Federal Reserve officials added further pressure, with New York Fed President John Williams stating the Fed still has a lot of work to do given high energy prices and demand driven by investment in artificial intelligence.

Philadelphia Fed President Anna Paulson warned that underlying measures of inflation remain “stubbornly elevated” and have shown little to no progress, adding that “looking ahead, if conditions evolve as I expect, some modest further tightening of monetary policy may be warranted” to ensure inflation returns to the Fed’s 2% goal.

Markets are now pricing in a 71% chance of a +25 basis point rate hike at the next FOMC meeting on October 27-28.

Some positive economic data provided partial support for equities, as weekly initial unemployment claims unexpectedly fell by 1,000 to a two-month low of 197,000, against expectations of a rise to 200,000.

August new home sales also surprised to the upside, rising +6.4% month-over-month to an eight-month high of 684,000 units, well ahead of the 616,000 consensus forecast.

Stocks also drew modest support after Treasury Secretary Bessent confirmed late Wednesday that the US and China agreed to extend their trade truce by an additional two months until January 10.

Among individual movers, ARM Holdings Plc (NASDAQ: ARM) led Nasdaq 100 decliners, closing down more than -8%, while Oracle (NYSE: ORCL) fell more than -3% after it sent a force majeure notice to Blue Owl Capital, a developer of a New Mexico data center dubbed Project Jupiter, in an attempt to defer payments should the project fail to come online in 2028 as planned.

Gen Digital (NASDAQ: GEN) tumbled more than -12% to lead S&P 500 losers after the Financial Times reported the company made an offer to acquire GoDaddy (NYSE: GDDY), which itself rallied more than +4% on the news.

MGM Resorts International (NYSE: MGM) dropped more than -10% after People Inc. dropped its plans to acquire the remaining shares of the company.

Trucking and freight companies were broadly lower as the crude spike raised fuel cost concerns, with FedEx Freight Holding (NYSE: FDXF) falling more than -4% and United Parcel Service (NYSE: UPS) and Saia Inc (NASDAQ: SAIA) each declining more than -3%.

On the upside, Everpure (NYSE: P) surged more than +11% to lead S&P 500 gainers after forecasting 2028 revenue of $7.0 billion to $7.3 billion, well above the analyst consensus of $6.19 billion.

Overseas markets were mixed, with the Euro Stoxx 50 closing down -0.43%, China’s Shanghai Composite falling -1.22%, and Japan’s Nikkei-225 rallying to a two-week high, closing up +0.76%.