Oil prices soared and U.S. stocks fell sharply Friday as investors reacted to rising geopolitical tensions following Israel’s strikes on Iranian nuclear and military facilities. The escalation raised fears of disruptions to global oil supplies and broader economic fallout.

The S&P 500 dropped 1.1%, erasing earlier weekly gains. The Dow Jones Industrial Average plunged 769 points, or 1.8%, while the Nasdaq composite lost 1.3%.

The oil market saw the biggest moves. Benchmark U.S. crude surged 7.3% to $72.98 per barrel, and Brent crude, the international standard, jumped 7% to $74.23. Concerns center on Iran, a major oil producer whose exports are already limited by Western sanctions. A broader conflict could further restrict supply and push prices higher globally.

Analysts also warned of potential threats to the Strait of Hormuz, a vital chokepoint near Iran through which a significant share of the world’s oil is shipped. Richard Joswick of S&P Global Commodity Insights noted that while previous Iran-Israel clashes caused brief oil spikes, prices often stabilized once escalation fears eased and supply remained unaffected.

Markets turned more volatile after Iran launched ballistic missiles toward Israel. Though oil remains below highs seen earlier this year, the price spike rattled investors. “This is an economic shock the global economy doesn’t need, but it’s more a hit to sentiment than fundamentals for now,” said Brian Jacobsen, chief economist at Annex Wealth Management.

Fuel-intensive companies were among the hardest hit. Carnival Corporation fell 4.9%, United Airlines slid 4.4%, and Norwegian Cruise Line dropped 5%. Meanwhile, energy producers benefited from the oil surge: Exxon Mobil rose 2.2%, and ConocoPhillips gained 2.4%.

Defense contractors also rallied on expectations of increased demand. Lockheed Martin, Northrop Grumman, and RTX all advanced more than 3%.

Gold prices climbed 1.4% as investors sought safe havens. However, U.S. Treasury prices fell—unusual during market stress—pushing the 10-year yield up to 4.41% from 4.36%. Rising oil prices raised concerns inflation could rebound, adding pressure to bond markets.

While inflation has been relatively stable near the Federal Reserve’s 2% target, fears of resurgence persist, especially amid ongoing trade policy uncertainty.

Stronger-than-expected consumer sentiment data from the University of Michigan also contributed to rising yields. The survey showed improved confidence for the first time in six months, partly due to President Trump pausing several tariffs. Consumers’ inflation expectations also moderated.

Among corporate movers, Adobe dropped 5.3% despite beating profit expectations. Analysts noted that while results were solid, investors may have been anticipating more aggressive revenue guidance.

By the close, the S&P 500 fell 68.29 points to 5,976.97. The Dow sank 769.83 points to 42,197.79, and the Nasdaq dropped 255.66 points to 19,406.83.

Overseas markets also declined. France’s CAC 40 slipped 1%, while Germany’s DAX fell 1.1%, reflecting global concerns over the situation in the Middle East.