So much for the tentative rebound. U.S. stocks turned lower on Thursday, and the reason was written in the price of oil. A fresh diplomatic standoff with Iran sent crude prices soaring, which in turn sent a shiver through equity markets worried about what that means for inflation and interest rates.

The catalyst was pretty straightforward: Tehran publicly rejected Washington's latest ceasefire proposal. The White House said it had sent a 15-point peace plan via Pakistan and that talks were ongoing, but Iranian officials shot it down. Instead, they countered with their own five-point framework that would, notably, grant them sovereign control over the Strait of Hormuz—a critical chokepoint for global oil shipments.

Speaking at a Cabinet meeting, President Donald Trump said Iran "desperately wants to make a deal," adding that Tehran had offered the U.S. "eight boats of oil" and "very substantial talks" are underway. But the public impasse left markets pricing in a protracted conflict with no clear off-ramp, effectively anchoring energy prices at elevated levels.

And when we say elevated, we mean it. WTI crude oil surged 4.1% to $94.04 per barrel. Brent crude jumped 5.4% to $107.73.

By midday in New York, the mood had soured. The S&P 500 fell 0.7%, the Dow Jones Industrial Average declined 83 points (0.2%), and the Nasdaq 100 slid 1%. The Russell 2000 shed 0.7%.

Here’s a snapshot of where things stood around lunchtime:

Data as of 12:00 PM ET

The major ETFs tracked the move: the Vanguard S&P 500 ETF (VOO) slid 0.7%, the SPDR Dow Jones Industrial Average ETF Trust (DIA) fell 0.2%, the Invesco QQQ Trust (QQQ) declined 1.0%, and the iShares Russell 2000 ETF (IWM) lost 0.7%.

Rising energy costs also solidified a narrative that’s bad news for gold: the Federal Reserve might have to pause any thoughts of cutting rates. That sapped the appeal of non-yielding assets. Spot gold fell 1.7% to $4,450.13 per troy ounce, with the SPDR Gold Shares (GLD) tracking the decline. Meanwhile, the CBOE Volatility Index (VIX)—the market's "fear gauge"—climbed 5.9% to 26.82, signaling rising anxiety.

Energy Wins, Tech Loses

In the stock market, the day's story was a tale of two sectors. The clear winner was energy, powered by that crude oil surge. The Energy Select Sector SPDR Fund (XLE) was the standout among S&P 500 sectors, up 1.6%. Valero Energy Corporation (VLO), a refiner, climbed 5.1% as refining margins widened with the jump in Brent prices.

The loser, and the biggest drag on the market, was technology. The Technology Select Sector SPDR Fund (XLK) was battered by a wave of selling in AI hardware stocks. The trigger? Alphabet Inc. (GOOGL) published research highlighting more efficient AI model architectures. For the market, that translated into a scary headline: "What if we need fewer high-end chips and less memory infrastructure to run this AI stuff?"

The selling was brutal for the companies that make that infrastructure. Lam Research Corp (LRCX) sank 6.7%. Applied Materials, Inc. (AMAT) fell 5%. The VanEck Semiconductor ETF (SMH) tumbled 3.0%. The fears rippled out to memory and server names, too: SanDisk Corporation (SNDK) dropped 8.2% and Super Micro Computer, Inc. (SMCI) slid 7.1%.

Who's Up, Who's Down

Beyond the sector drama, here’s a look at some of the biggest individual movers in the Russell 1000 on Thursday.

Top Gainers:

Top Losers:

So, to sum up a messy Thursday: Geopolitics gave oil a boost, which spooked the inflation-wary stock market. Then, a tech research paper gave investors an excuse to sell the AI winners of the last year. Sometimes the market's story is simple, even when the moves aren't.