"The markets have realized there is no easy way out of the war." Stocks have collapsed the most since it began

Dwindling hopes that the U.S. and Iran could agree on a cease-fire soon pushed oil prices up and simultaneously crashed U.S. stocks. They posted their worst drop since the war began, The New York Times noted .

- The S&P 500 broad market index collapsed at the end of trading on March 26 by 1.7% - to its lowest level since September. It is on its way to its worst month in the last year, Bloomberg calculated.

- The tech-heavy Nasdaq Composite collapsed 2.4%, entering correction territory as it lost more than 10% of its relative last peak in October, MarketWatch wrote.

- The Dow Jones Industrial Average was down more than 1 percent.

- The Russell 2000 index of small and mid-capitalization companies fell 1.8%.

- The VIX volatility index, which is called Wall Street's fear indicator, soared 12%, breaking the 28-point mark. The 30-point level usually indicates a period of heightened market uncertainty, Investing.com writes .

Stocks from the software, semiconductor and Internet communications segments led the market decline. The move reflects continued rotation out of the technology sector, Hardika Singh, a strategist at Fundstrat Global Advisors, told MarketWatch. As the downturn progresses, investors get rid of recent leaders to lock in gains and then "buy back the drawdown" in other assets or rebuild portfolios to be more defensive, she explained.

Retail investors began to sell even Nvidia securities, which have been actively buying for a long time, Bloomberg writes. On Wednesday, they were reducing their stake in the company for the first time since July, according to Vanda Research. However, net sales were insignificant - about $44.9 million - and may portend a market reversal. As Vanda analysts point out, that could be a positive signal, as retail investors are often the last to leave.

The tech index has also come under pressure due to a sell-off in social networking companies led by Meta - after it and Google were found guilty of negligence in a high-profile addiction case.

The Bloomberg index tracking the "Magnificent Seven" stocks fell about 3 percent to close at its lowest level since late August.

Against that backdrop, the energy sector is on track for its best quarter in its history, MarketWatch points out. The S&P 500 Energy Sector Index has added 37.8% in that time, according to Dow Jones Market Data. It's up 1.6% on Thursday. So far, it's the only sector within the S&P 500 that rose in March.

Brent crude oil rose 5.7% to close trading above $107 a barrel. It is on track to rise nearly 50% for the month as the near-total closure of the Strait of Hormuz has drained millions of barrels of daily production while also fueling prices of refined products from diesel to jet fuel, Bloomberg notes.

WTI futures were up 4.5% to nearly $94.5 on Thursday.

Speaking about the dynamics of oil prices, US President Donald Trump said their rise, as well as pressure on the broader market, was not as strong as he had expected. "It's going to go back to where it was and probably even lower," he said.

At the same time, Iranian media close to the state reported that Tehran was preparing a bill that would impose a fee on ships passing through the Strait of Hormuz.

The collapse was a sharp reversal from earlier in the week, when the S&P 500 rose more than 1 percent amid optimism that a war with Iran might soon be over. However, that turned out to be a false signal, Fundstrat strategist Singh said .

"Markets have begun to realize that while President Donald Trump may want to get out of this war, doing so is simply not going to work," she said. According to her, it is no longer enough for investors to follow every word of the American leader in search of answers to their questions.

"Progress in U.S.-Iran negotiations looks highly questionable at best," agrees Matt Maley of Miller Tabak.

UBS, cited by CNBC, estimates that if the war ends "quickly," the S&P 500 could soon find a bottom and then recover to around 7,150 points by the end of the year. That implies a potential upside of 10% from the March 26 close, but if business disruptions continue through the end of April, the index could fall to about 6,000 points, or more than 7%, before rebounding, UBS predicts. In the event of a more prolonged shock and energy shortages, the bank expects a 17% collapse.

"The war in Iran and the resulting spike in oil prices continue to dampen risk appetite," explains Adam Turnquist of LPL Financial. - A sustained market recovery will require significant progress towards a peace agreement and the opening of the Strait of Hormuz".

This article was AI-translated and verified by a human editor