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

Markets worldwide experienced a sharp downturn as tensions escalated in the Middle East and Elon Musk announced revised capex guidance. S&P 500 futures dropped over 1% before the New York market opened, with even steeper declines in the tech-focused Nasdaq, falling 1.82%. Asia and Europe both saw overall declines. The Iran-backed Houthis launched additional drone attacks on Saudi airports and the Saudi Aramco Shaybah oil facility, while the U.S. evacuated its staff from the Riyadh embassy.

Iran continued targeting ships in the Strait of Hormuz, with four drones striking within 24 hours. Washington and Israel reportedly plan to resume major combat operations against Iran post the U.S. midterm elections. Oil prices surged to $112 per barrel, negatively impacting oil-importing Asia. China's CSI 300 index fell 1.84%, marking a 15% year-to-date decline.

Tesla stock plummeted 5.35% after-hours following its Q3 earnings call, where CEO Elon Musk cut 2026 capital expenditure guidance from $25 billion to $20 billion. Deutsche Bank analyst Jim Reid noted that the reduced guidance raises concerns about Tesla's accelerated shift to AI and robotics, as current revenue and earnings closely align with expectations.

France's 10-year bond yield hit 5.1%, a level not seen since 2002, signaling traders' doubts about France's fiscal crisis resolution. S&P 500 futures slipped 1.02% earlier today, bouncing back 0.58% yesterday. Europe's Stoxx 600 index declined 0.92%, and the U.K.'s FTSE 100 dropped 0.46% before noon. South Korea's KOSPI fell 3.52%, while Japan's Nikkei 225 decreased 2.65%.

India's Nifty 50 slipped 0.82%. China's CSI 300 index remains down 1.84% year-to-date, signaling a correction. Brent crude prices reached $112 per barrel, and Bitcoin dropped to $81,922. Prior to Elon Musk's remarks, SpaceX stock surged 8% following a stellar Q1 2027 earnings call that exceeded analysts' expectations. Musk's revenue guidance for 2027 ($33 billion to $37 billion) exceeded analyst estimates by 57%, and his claim of SpaceX potentially generating $500 billion to $1 trillion in annual revenue by year-end dwarfed the Street's projected $186 billion.

Morgan Stanley's Nicholas Lentini and team estimated that AI capital expenditure will reach $1.6 trillion by 2027, with AI enablers and adopters accounting for 78% of earnings growth.