Stock markets around the world fell sharply Friday, with major U.S. indexes declining from record highs as rising oil prices sent ripples through global financial markets. The S&P 500 dropped 1.1% from its all-time high set Thursday, while the Dow Jones Industrial Average was down 518 points, or 1%, and the Nasdaq composite fell 1.4% from its own record as of midday trading.

Technology stocks led the decline in a sharp reversal from their strong performance earlier in the year. Nvidia, which has become synonymous with the artificial intelligence boom, dropped 3.3% and was the heaviest drag on the S&P 500 despite entering the day with gains of more than 26% for the year. Applied Materials fell 0.7% even after reporting stronger-than-expected quarterly profit growth.

Rising oil prices continued to pressure markets as the ongoing conflict with Iran keeps the Strait of Hormuz closed to oil tankers, preventing crude deliveries worldwide. Brent crude oil, the international benchmark, rose 3.8% to $109.74 per barrel, well above its pre-war level of approximately $70. The energy disruption has contributed to inflation concerns beyond what economists had anticipated.

The bond market showed the clearest signs of investor anxiety, with Treasury yields climbing significantly. The yield on the 10-year Treasury rose to 4.58% from 4.47% Thursday, while the 30-year Treasury yield approached its highest level since 2023 after breaking above 5%. Higher yields make borrowing more expensive for businesses and consumers while typically pressuring stock prices downward.

Smaller company stocks experienced some of the day's steepest losses, with the Russell 2000 index of small-cap stocks falling 2.4%, more than double the S&P 500's decline. These companies are more vulnerable to rising borrowing costs as they often rely on debt financing for growth. International markets also declined sharply, with South Korea's Kospi dropping 6.1% after briefly reaching the 8,000 level for the first time.

Traders have largely abandoned expectations that the Federal Reserve will resume interest rate cuts this year, with some even betting on potential rate increases in 2026. The shift reflects concerns about persistent inflation driven by the conflict and its impact on energy prices, complicating the central bank's monetary policy decisions.