Equities Slide on Geopolitical Tensions; Oil Surges Above $92; Defense Stocks Rally

Lead US equities are broadly lower at midday, with the S&P 500 down 1.25% and Nasdaq 100 down 1.84%, as escalating geopolitical tensions in the Middle East drive a flight to safety. WTI crude has surged 6.41% to $92.40, while defense contractors Lockheed Martin and RTX are up significantly after strong earnings. Session narrative US equities are experiencing broad declines at midday, with major indices in the red. The S&P 500 is down 1.25%, the Nasdaq 100 has fallen 1.84%, and the Dow is off 1.01%. This downturn is largely attributed to escalating geopolitical tensions in the Middle East, which have sent oil prices soaring. WTI crude is up 6.41% to $92.40, and Brent crude has climbed 6.95% to $100.61. The increased risk aversion is also reflected in the VIX, which is up 13.58%. In contrast to the broader market, defense stocks are rallying. Lockheed Martin is up 11.23% and RTX is up 7.7% following strong Q2 earnings reports, which highlighted record backlogs and resilient demand. Concerns over rising AI spending, particularly after Alphabet's earnings, are also weighing on tech sentiment. The US 10-year Treasury yield is up 0.816% to 4.7%, signaling growing concern in the bond market and potentially lower rate cut expectations. The US Dollar Index is up 0.29% as investors seek safe-haven assets. Cross-asset check Equity markets are broadly lower, with the S&P 500 futures down 1.22% and Nasdaq futures down 1.71%. The Dow futures are also lower by 0.99%. In fixed income, the US 10-year yield is up 0.816% to 4.7%. Commodities are seeing significant movement, with WTI crude up 6.41% to $92.40 and Brent crude up 6.95% to $100.61. Gold is down 2.39% and silver is down 3.88%. The US Dollar Index is up 0.29%. Volatility, as measured by the VIX, is up 13.58%. The geopolitical landscape is dominated by reports of explosions in the Middle East and increased tensions involving Iran, which are directly impacting oil prices and risk sentiment. The US Senate's blocking of a resolution curbing Trump's Iran war powers adds to the uncertainty. The UK has stated its armed forces are ready to protect the country from any attack after Iran threatened British bases. These developments are contributing to the flight to safety seen across markets. The earnings season continues to provide some bright spots, particularly in the defense sector. Lockheed Martin and RTX both reported strong Q2 results, with record backlogs, driving their stocks higher despite the broader market downturn. Conversely, concerns about the profitability of massive AI investments, highlighted by Alphabet's earnings, are pressuring tech stocks. Acme United also reported a 16% increase in net sales for Q2 2026. Themes & continuing stories Geopolitical tensions in the Middle East remain the dominant theme, driving significant volatility in energy markets and influencing broader risk sentiment. The surge in oil prices is a direct consequence of these tensions. The debate around AI spending and its impact on corporate profitability continues to be a key narrative for the tech sector. The bond market's reaction to these developments, particularly rising Treasury yields, suggests a re-evaluation of future interest rate expectations. What’s ahead Market participants will continue to monitor geopolitical developments in the Middle East closely, as any further escalation could significantly impact oil prices and global risk appetite. The ongoing earnings season will also remain a focus, with investors scrutinizing reports for insights into corporate performance and future outlooks, especially regarding AI investments. The trajectory of Treasury yields will be watched for indications of shifting expectations for monetary policy.