Markets sell off worldwide as further conflict looms in the Middle East and Elon Musk cuts capex guidance

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Key takeaways

Global stock markets and S&P 500 futures fell amid escalating Middle East conflicts and rising oil prices.
Tesla shares dropped after the company lowered its 2026 capital expenditure guidance.
French 10-year bond yields reached 5.1%, their highest level since 2002.

Middle East conflict and rising oil prices drive global sell-off

A number of familiar factors appear to be driving the selling. The Iran-backed Houthis conducted further drone strikes on Saudi airports and the Saudi Aramco Shaybah oil field. The U.S. ordered its staff to vacate the U.S. embassy in Riyadh. Iran continued its campaign of striking ships trying to use the Strait of Hormuz, with four drones in the last 24 hours. Washington and Israel are reportedly planning to restart major combat operations against Iran after the midterm elections in America. Unsurprisingly, the price of oil rose to $112 per barrel.

High oil prices are bad for Asia, which imports most of its fuel. On top of that, the supply of oil to China from Iran’s “shadow fleet,” which had been at sea prior to the blockade of the Hormuz, has finally been exhausted, the Wall Street Journal reported. China’s CSI 300 index declined 1.84%, down 15% year to date.

Corporate earnings and bond yield pressures

Tesla fell by 5.35% in after-hours trading following its Q3 earnings call. The company cut its 2026 capex guidance from $25 billion to $20 billion. “So that raised questions about the speed of its transition into AI and robotics, while current revenue and earnings were close to expectations,” Deutsche Bank’s Jim Reid said.

Finally, the yield on France’s 10-year bonds hit 5.1%—a level they haven’t seen since 2002—signaling that traders don’t yet believe that France has put its fiscal crisis behind it.

Global market indices and commodity updates

S&P 500 futures were down 1.02% this morning. The index rose 0.58% yesterday.

In Europe, the Stoxx 600 fell 0.92% in early trading, and the U.K.’s FTSE 100 fell by 0.46% before lunch.

Asia: South Korea’s KOSPI was down 3.52%. Japan’s Nikkei 225 was down 2.65%. India’s Nifty 50 was down 0.82%. China’s CSI 300 was down 1.84%, and is now down 15% year to date—clearly in correction territory.

Brent crude rose to $112 per barrel.

Bitcoin declined to $81,922.

SpaceX guidance and artificial intelligence spending

SpaceX stock rose 8% yesterday after Elon Musk and his rocket/AI company delivered a huge earnings beat the day before. The company’s future guidance was so much bigger than expected that Stifel analyst Jonathan Siegmann could hardly believe it. Musk’s Q1 2027 revenue guidance ($33 billion to $37 billion) was 57% above analysts’ estimates, he told clients in a note seen by Fortune. And Musk’s reference to SpaceX making between $500 billion and $1 trillion in annual revenue by the end of 2027 vastly eclipsed the Street’s estimate of $186 billion.

“The scale of potential estimate revisions is completely unprecedented,” Siegmann wrote. “Estimates lag Elon’s communicated targets by as much as the equivalent of [Amazon’s last 12 months of] revenues ($776 billion).”

This mind-bending chart from Nicholas Lentini and the team at Morgan Stanley shows where all the AI hyperscaler and neocloud capex money goes. They estimate that AI capex will hit $1.6 trillion in 2027. Unsurprisingly, chipmaker Nvidia is the top beneficiary of the boom in spending. “This capex drives ~25% of [S&P 500] sales growth next year, and AI enablers/adopters broadly account for 78% of earnings growth,” they said in a note.

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