Shares of XLK slid 1.6% to $136.25 on Thursday as the Iran conflict entered its fourth week and the Federal Reserve dashed hopes of near-term rate relief, squeezing tech stocks from both sides: rising costs and rising rates.
• Oil Has Surged 40% Since the War Began, and It's Getting Worse
Brent crude jumped 5% to near $109 a barrel on March 18 after an Israeli strike on Iran's South Pars gasfield — the first direct attack on production facilities. Total oil output cuts in the Middle East are estimated at 7 million to 10 million barrels per day, or 7–10% of global demand.
Capital Economics warned that a longer war could push Brent to $130 in Q2, and even a contained three-month conflict could average $150 over the next six months. For tech investors, expensive oil means pricier electricity, higher data center operating costs, and consumers with less to spend on devices and subscriptions.
• The Fed Just Told Markets: Don't Count on Rate Cuts
The FOMC voted 11-1 to hold rates at 3.5%–3.75%.
The "dot plot" pointed to just one rate reduction this year and one more in 2027.
Officials raised their 2026 inflation forecast, now expecting the core PCE price index — the Fed's preferred inflation gauge — to run at 2.7%. Higher-for-longer rates are especially punishing for growth stocks, whose valuations depend on future earnings that become less valuable when borrowing costs stay elevated. Stocks fell Wednesday and Thursday after Powell underscored uncertainty surrounding the oil shock.
• XLK Is Down 3.5% Year-to-Date With Short Interest Tripling
XLK's year-to-date return stands at -3.6% , erasing late-2025 gains. Shares sold short in XLK nearly tripled from roughly 6.5 million to over 18 million between November and late January , signaling that bearish bets were building before the war. Three-month net fund flows turned negative at -$1.59 billion , showing institutional investors are pulling money out.
• The Clock Is Ticking on Resolution — and on the Fed Chair
Morgan Stanley warns a conflict longer than a few weeks "raises the odds of sustained economic pressure through higher oil prices, hotter inflation and less-certain financial conditions." Meanwhile, Powell's term expires in May, and Trump's pick Kevin Warsh — who favors lower rates — awaits confirmation. A leadership change could shift the calculus, but until oil falls and inflation cools, tech remains in the crosshairs.