Global Markets Sell Off as Middle East Conflict Escalates and Tesla Cuts Capex

Nasdaq futures fell 1.82% before the New York open as traders sold stocks worldwide, with Middle East escalation and Elon Musk's capex cut driving the sharpest risk-off session in weeks. S&P 500 futures dropped more than 1%, Asia and Europe both traded lower, and Brent crude climbed to $112 per barrel.

What's driving the sell-off?

A stack of familiar pressure points turned acute at once:

• The Iran-backed Houthis conducted further drone strikes on Saudi airports and the Saudi Aramco Shaybah oil field.
• The U.S. ordered staff to vacate its embassy in Riyadh.
• Iran struck four ships attempting to use the Strait of Hormuz with drones in the last 24 hours.
• Washington and Israel are reportedly planning to restart major combat operations against Iran after America's midterm elections.

Oil markets answered the way you'd expect: Brent rose to $112 per barrel.

How hard did Asia get hit?

High oil prices squeeze Asia hardest, since the region imports most of its fuel. The supply pressure got worse: the Wall Street Journal reported that Iran's "shadow fleet" — tankers that had been at sea before the Hormuz blockade — has finally run out of oil.

The numbers show the damage. South Korea's KOSPI fell 3.52%, the region's worst performance. Japan's Nikkei 225 dropped 2.65%. China's CSI 300 declined 1.84% and is now down 15% year to date, squarely in correction territory. India's Nifty 50 slipped 0.82%.

The takeaway: with the shadow fleet dry and Hormuz under drone attack, Asia's fuel bill keeps climbing while its equity markets pay for it.

Why did Tesla drop 5.35%?

Tesla fell 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.

The cut lands at an awkward moment — the same session in which Wall Street is cheering a much bigger AI story elsewhere (more on that below). The plain reading: a $5 billion reduction in spending plans made investors question the pace of Tesla's AI pivot.

What about Europe and France's bond warning?

Europe's Stoxx 600 fell 0.92% in early trading, and the U.K.'s FTSE 100 lost 0.46% before lunch. The sharper signal came from bonds: the yield on France's 10-year bonds hit 5.1%, a level not seen since 2002. Traders don't yet believe France has put its fiscal crisis behind it.

That's a 23-year high in borrowing costs for the euro zone's second-largest economy — and a louder alarm than anything the equity screens showed.

SpaceX beat the Street by Amazon's entire revenue

Against the red tide, SpaceX stock rose 8% yesterday after Musk's rocket and AI company delivered a huge earnings beat the day before.

The guidance gap stunned analysts. Stifel's Jonathan Siegmann told clients in a note that Musk's Q1 2027 revenue guidance of $33 billion to $37 billion came in 57% above analysts' estimates. Musk's reference to SpaceX generating between $500 billion and $1 trillion in annual revenue by the end of 2027 vastly eclipsed the Street's $186 billion estimate.

"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)."

In short: Wall Street was off by roughly Amazon's entire annual revenue in modeling Musk's company.

Where is all the AI capex money going?

A chart from Nicholas Lentini and the team at Morgan Stanley maps where AI hyperscaler and neocloud capex dollars land. Their estimate: AI capex will hit $1.6 trillion in 2027, with chipmaker Nvidia the top beneficiary of the spending boom.

"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.

The scoreboard

• S&P 500 futures: down 1.02% this morning; the index rose 0.58% yesterday.
• Europe: Stoxx 600 down 0.92%; FTSE 100 down 0.46%.
• Asia: KOSPI down 3.52%; Nikkei 225 down 2.65%; Nifty 50 down 0.82%; CSI 300 down 1.84%.
• Brent crude: $112 per barrel.
• Bitcoin: declined to $81,922.

With Tesla pulling back $5 billion in capex while Morgan Stanley projects $1.6 trillion of AI spending by 2027, the market is now pricing a split verdict on the AI buildout — one that $112 oil and a Hormuz blockade could make a lot more expensive.