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Wall Street indices fell sharply on Friday, with the S&P 500 and Nasdaq set to post weekly losses as escalating tensions between the US and Iran fueled inflation concerns. The Dow Jones Industrial Average dropped 1.2%, while the S&P 500 and Nasdaq declined by 1.5% and 1.8% respectively. Analysts attribute the decline to fears that renewed military conflicts in the Middle East could disrupt global oil supplies, pushing energy prices higher and accelerating inflation. This comes amid a broader market unease about the Federal Reserve's potential response to inflationary pressures, which could delay interest rate cuts. The market sell-off reflects growing anxiety over inflation's impact on corporate earnings and consumer spending. Higher oil prices directly increase production costs for energy-dependent sectors like manufacturing and transportation. Traders are now pricing in a higher probability of prolonged Fed rate hikes, which could weigh on equity valuations. The dollar index gained 0.5% against major currencies as investors sought safe-haven assets amid geopolitical risks. For global investors, the situation highlights the interconnectedness of geopolitical events and financial markets. Gulf and MENA investors, particularly those with exposure to energy markets, should monitor oil price volatility and Fed policy signals. Key indicators to watch include OPEC+ production decisions, US inflation data, and statements from Federal Reserve officials. The S&P 500 and Nasdaq remain under pressure until clarity emerges on the trajectory of US-Iran tensions.
