US stock market extends sell-off into second day; Nasdaq, Dow enter correction territory

A day after US President Donald Trump said the impact of the ongoing conflict with Iran on the stock market was “not as bad” as anticipated, US stocks were sold off heavily.

Investors appeared unconvinced by Trump’s decision to further delay attacks on Iran's power infrastructure, as the sell-off in US equities extended into a second day, pushing the Nasdaq into correction territory.

The tech-heavy Nasdaq 100 index fell another 1.4% in Friday's trade on 27 March to reach the day’s low of 23,472, building on the previous session’s 2.4% crash. The two-day sell-off has pushed the index down 11% from its October highs, marking its official entry into correction territory.

On Wall Street, corrections are defined as losses of 10%, while bear markets are drawdowns of 20%. Meanwhile, the Dow Jones Industrial Average has also slipped into correction territory, as it has fallen 10% from its February high of 50,512.

The S&P 500 is also moving towards the correction zone in line with its peers, as it is just 1.5% away from slipping 10% from its recent highs. The index has been in the red for five consecutive weeks and is on pace for its longest streak of weekly losses since 2022. The small-cap benchmark Russell 2000 is down 11.44% from its 2026 highs.

Initial optimism fades

US stocks showed resilience at the beginning of the conflict compared to Asian markets, as the country is a net energy exporter. However, that optimism has faded as the month-long war’s economic costs have started to build up, coupled with a sharp sell-off in Treasuries.

Elevated oil prices have raised concerns about persistent inflation, with US rate futures beginning to price in the possibility of an interest rate hike later this year, while analysts have not ruled out a recession if elevated prices persist.

Pressure is building on Trump to reopen the Strait of Hormuz, as he had earlier issued multiple threats to Iran, including plans to target Kharg Island, Iran’s primary crude export terminal, and intensify attacks on Iran’s South Pars gas field. However, he has since softened his tone and initiated talks with Iran.

Although Trump’s recent statements indicated that he is willing to end the war, the US is reportedly sending more troops to the region, creating uncertainty among investors over a potential ceasefire in the Middle East.

While Trump said the talks were progressing well, Iran has publicly denied that direct negotiations were underway and instead put forward its own five-point proposal to end the conflict after denying Trump’s 15-point ceasefire plan.

Meanwhile, missile strikes in West Asia have continued, with Israel reportedly warning on Friday that it will expand its attacks on Iran, as Tehran continues firing missiles at Israel and Gulf Arab nations.

The Islamic Revolutionary Guard Corps (IRGC) executed the 83rd wave of Operation 'True Promise IV' in the early hours of Friday, striking key American and Israeli military installations across the region with missiles and drones, according to the Fars news agency.

Crude prices strengthen further

Brent crude continued to build on the previous day’s gains, with prices rising another 4.7% to reach an intraday high of $112 per barrel, as traders fear that supply disruptions will persist.

Before the start of the war, Brent crude was around $70, indicating that prices have surged nearly 60% in a month, sending shockwaves through the global economy and hitting Asia especially hard, as it depends heavily on the Middle East for oil imports.

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