US markets experienced their largest drop since the start of the US-Israel conflict with Iran, as investors reacted to rising tensions and mixed signals from former President Donald Trump. On Thursday, the Dow Jones Industrial Average fell 450 points, the S&P 500 dropped 1.7%, and the tech-focused Nasdaq plunged 2.3%, officially entering correction territory after falling more than 10% from its recent peak. Oil prices have surged since the conflict began, reaching highs not seen since Russia’s invasion of Ukraine in 2022 and 2023. Brent crude, the global benchmark, reached about $107 a barrel, while US crude traded at $93 a barrel. The average price at US gas stations reached $3.98 a gallon, according to AAA. Despite the surge, Trump said during a cabinet meeting that oil prices “have not gone up as much as I thought.” He predicted that prices would return to previous levels and could even fall lower. The former president also said the stock market impact would reverse once the conflict ends. Market sentiment has been volatile amid mixed messages from Trump on US-Iran negotiations. Stocks fell Thursday morning after Trump posted a warning to Iranian negotiators, stating they “better get serious, before it’s too late” and that there would be no turning back if talks failed. Later in the day, Trump said “very substantial talks” were ongoing, and Iran allowed 10 oil tankers to pass the blocked Strait of Hormuz, calling the move a “present” to the US. After markets closed, the White House announced a 10-day extension of the pause on Iranian energy infrastructure strikes, until April 6. Trump described the talks as “going very well” despite what he called misinformation in the media. The conflict and uncertainty over negotiations come as a new report predicts higher inflation in the United States. The Organization for Economic Cooperation and Development (OECD) estimates US inflation will average 4.2% in 2026, up from about 2.6% in 2025. Global inflation is expected to rise by an average of 1.2% across G20 countries. The report highlighted that higher oil prices are a major factor driving inflation. Rising energy costs increase transportation and production expenses, which ripple through the supply chain. The OECD also pointed to higher fertilizer prices due to regional instability, which could affect food prices globally. “The evolving conflict in the Middle East has human and economic costs for the countries directly involved and will test the resilience of the global economy,” the OECD report said. Investors have been cautious as the market reacts to uncertainty. The Nasdaq’s correction reflects deep concern in the tech sector, while traditional industrial and financial stocks also saw significant losses. Analysts warned that continued volatility could follow any sudden developments in the Middle East. The combination of rising oil costs, mixed political signals, and increasing inflation has heightened fears of a slowdown in economic growth. While Trump’s comments suggested a potential resolution could stabilize markets, ongoing geopolitical tensions continue to weigh on investor confidence. Oil and gas companies have benefited from higher prices, but rising energy costs threaten broader economic growth by increasing costs for manufacturing, transportation, and agriculture. Consumers are already feeling the pinch at the pump, and any further spikes in energy prices could impact household budgets. Economists stress that global supply chains remain vulnerable to geopolitical disruptions. The Middle East conflict, combined with previous supply shocks from Ukraine and Russia, highlights how sensitive the global economy is to energy markets. For now, US markets remain cautious. Investors will closely monitor developments in US-Iran negotiations, oil production levels, and government measures to control inflation. Analysts say that clarity on these issues could stabilize markets, but uncertainty is likely to persist in the near term.