US stocks closed lower on Thursday, weighed down by declines in shares of companies such as Micron Technology and Tesla, amid concerns that rising oil prices could fuel inflation and limit the likelihood of future interest rate cuts.

Investors focused on warnings from Federal Reserve Chair Jerome Powell on Wednesday, who indicated that the economic outlook remains uncertain in light of the USIsrael war with Iran, which has driven energy prices higher and intensified inflationary pressures. The Fed kept interest rates unchanged, as widely expected.

Interest rate futures showed that traders do not anticipate any rate cuts before mid-2027, according to the CME FedWatch Tool.

Other central banks followed a similar path, with both the European Central Bank and the Bank of England holding rates steady, citing ongoing uncertainty tied to the Middle East conflict.

Mike Dickson, Head of Research and Quantitative Strategies at Horizon Investments, said the market is digesting Powells remarks along with signals from other central banks highlighting real inflation risks.

Stock performance

The SP 500 fell 0.27% to close at 6,606.49 points, while the Nasdaq declined 0.28% to 22,090.69 points. The Dow Jones Industrial Average dropped 0.44% to finish at 46,021.43 points.

Eight of the eleven sectors within the SP 500 ended in negative territory, led by the materials sector, which fell 1.55%, followed by consumer discretionary, down 0.87%.

All three major indices closed below their 200-day moving averages, reflecting weakening market momentum. The SP 500 has lost more than 3% since the start of 2026, trading near its lowest levels in four months.

Oil and geopolitical impact

Oil prices pulled back from intraday highs, after Brent crude briefly touched $119 per barrel before retreating amid government efforts to boost supply. The moves followed Iranian strikes targeting energy infrastructure in the Middle East.

Market sentiment remained closely tied to developments in the conflict, as investors view higher energy prices as a key driver of inflation and a constraint on monetary easing.

Notable stock moves

Nvidia shares fell 1%, while precious metals companies such as Newmont and Freeport-McMoRan dropped 6.9% and 3.3%, respectively.

Tesla declined 3.2% after US regulators expanded an investigation into approximately 3.2 million vehicles equipped with its Full Self-Driving system, citing concerns over the systems ability to detect hazards in low-visibility conditions.

Labor market data

Data released Thursday showed initial jobless claims declined unexpectedly, signaling labor market resilience and a potential pickup in hiring momentum in March.

Market breadth

Declining stocks outnumbered advancers within the SP 500 by a ratio of 1.4 to 1, with 17 new highs and 26 new lows recorded. On the Nasdaq, 30 stocks hit new highs compared to 276 new lows.

Trading volume on US exchanges reached approximately 20 billion shares, in line with the average over the past 20 sessions.