Markets face triple threat of Iran war reigniting, AI bubble popping, and Fed rates rising while epic SpaceX IPO could fuel even more chaos

Tensions in the Gulf had already been escalating as the U.S. and Iran increasingly exchange fire, with both sides trying to establish their own shipping lanes in the Strait of Hormuz.

Investors should buckle up for a bumpy ride as multiple risks have suddenly converged to test what looked like an unstoppable stock rally.

In just the last few days, the Iran war started heating up again, the AI boom showed signs of a bubble about to burst, and strong jobs data made rate hikes from the Federal Reserve more likely.

Add to that mix SpaceX’s upcoming IPO, which could draw so much demand that investors rushing to raise cash to buy shares could unleash a wave of selling that ripples through the stock market.

Futures tied to the Dow Jones industrial average fell 86 points, or 0.17%. S&P 500 futures were down 0.19%, and Nasdaq futures lost 0.16%.

U.S. oil futures rose 2.6% to $92.88 a barrel, while Brent crude climbed 2.8% to $95.67. Gold fell 0.5% to $4,342 per ounce.

The U.S. dollar was up 0.03% against the euro and up 0.02% against the yen. The yield on the 10-year Treasury was flat at 4.532%.

On Sunday, Iran launched missiles at Israel, marking the first such attack since a ceasefire was reached in early April. That came after Israel continued bombing Lebanon in defiance of Washington’s request days ago to stand down.

While talks to extend the ceasefire have stalled, President Donald Trump scrambled to avoid reigniting the war by distancing the U.S. from the Israeli attacks, which were in retaliation against Hezbollah missiles, and by telling Israeli Prime Minister Benjamin Netanyahu not to strike back at Iran.

Before the latest salvos, tensions in the Persian Gulf had already been escalating as the U.S. and Iran increasingly exchange fire, with both sides trying to establish their own shipping lanes in the Strait of Hormuz.

Despite the skirmishes, Wall Street assumed all-out war would not return, especially after a report said Trump would avoid going that route unless more U.S. troops were killed.

Tech selloff

On Friday, tech stocks led a market bloodbath after the Labor Department’s monthly jobs report showed employers added a net 172,000 jobs last month, nearly double Wall Street forecasts.

Prior months were also revised sharply higher, indicating the labor market was much more resilient than previously thought in the face of higher oil prices caused by the Iran war.

With the employment picture looking steadier, the Fed is expected to focus more on fighting inflation, which has exceeded the central bank’s 2% target for five years. Investors priced in a greater probability of tighter monetary policy, giving up on the prospect of additional rate cuts anytime soon.

But the stock market’s troubles began when chip designer Broadcom gave disappointing AI-related guidance late Wednesday in its quarterly earnings report. That sparked a selloff on Thursday that got further stoked by Friday’s strong jobs report.

The coming week will likely see even more volatility as fresh readings on consumer inflation on Wednesday and producer inflation on Thursday fuel additional Fed rate hike fears.

Also on Thursday, SpaceX will price its IPO, and shares will begin trading on Friday. While IPOs are often accompanied by volatility, Greg Boutle, head of U.S. equity derivative strategy at BNP Paribas, pointed out in a note that what’s different this time is the largest market cap ever seen in a U.S. IPO.

SpaceX plans to raise at least $75 billion by selling over 555 million shares at $135 a piece, valuing the company at more than $1.75 trillion. If underwriters exercise options for additional allotments to meet high demand, proceeds could grow to $85.7 billion.

“We think many of the standalone SpaceX flows might be digestible. The problem is that many of these flows are potentially same-way and additive,” Boutle explained. “With the SpaceX free float reported to be close to $75bn on IPO, it’s easy to see how $30bn of passive buying, a retail investor chase, and levered ETF and option flows collectively could quickly become challenging for the stock’s liquidity. If all are chasing to buy (or sell) at the same time, the risk of price dislocation becomes much greater.”

This story was originally featured on Fortune.com