US STOCKS-S&P 500 flat as tech gains offset Middle East conflict fears

By Johann M Cherian and Ragini Mathur

March 2 (Reuters) - The benchmark S&P 500 was flat on Monday as gains in technology stocks offset broader market losses stemming from worries that a prolonged Middle East conflict could disrupt global trade routes and reignite inflationary pressures.

Sectors that were hit the most included airlines, as a number of carriers halted flights, while several oil and gas facilities in the Middle East stopped production, which pushed crude prices up over 8%.

Delta DAL.N and United Airlines UAL.O tumbled over 2.5% each, while crude-price-sensitive cruise stocks such as Carnival CCL.N lost 8% and Norwegian Cruise NCLH.N fell over 10%.

Offsetting those losses, Nvidia NVDA.O gained 2.8% and Microsoft MSFT.O climbed 1.7%, recovering from sharp declines last month. The gains helped the S&P 500 and the Nasdaq cut losses after briefly hitting two‑week lows earlier in the session.

Defense stocks also got a boost, with Lockheed Martin LMT.N up 2.5% and Palantir PLTR.O up 5.6%.

"At times when there is nervousness, people will go to the leaders in the market. Obviously they're going to go to defense stocks but they also go for leadership and companies that are strong with deep balance sheets," said Joe Saluzzi, co-head of Equity Trading at Themis Trading.

Geopolitics is in the spotlight after coordinated U.S. and Israeli strikes on Iran over the weekend killed Tehran's Supreme Leader. Israel launched retaliatory attacks following air strikes by Iran and Hezbollah militants in Lebanon, deepening fears that the conflict could widen further across the region.

President Donald Trump also told CNN that the "big wave" is yet to come, although some Middle Eastern countries were lobbying U.S. allies to persuade a swift end to the war.

"Right now the market seems to be thinking this is a relatively short event and it won't take years and seems to be taking it in stride," Saluzzi said.

At 11:42 a.m. ET, the Dow Jones Industrial Average .DJI fell 96.59 points, or 0.20%, to 48,881.33, the S&P 500 .SPX lost 3.29 points, or 0.05%, to 6,875.59 and the Nasdaq Composite .IXIC gained 52.06 points, or 0.22%, to 22,718.73.

Eight of the S&P 500 sectors were in the red, with energy .SPNY bucking the trend with a 1.8% rise.

Wall Street's fear gauge, the CBOE VIX .VIX, eased from a three-month high hit earlier in the day and was last up 1.45 points at 21.31.

Markets were already rattled by AI disruption concerns, private credit jitters and trade policy uncertainty - factors that drove the S&P 500 and the Nasdaq to their steepest monthly declines since March 2025.

A sustained oil price spike threatens to amplify inflationary pressures just as latest data showed U.S. tariffs pushed input prices higher in February.

Wells Fargo's Ohsung Kwon warned the S&P 500 could fall to 6,000 points, nearly 13% below its last close, if crude surpasses $100 per barrel, with earnings potentially taking a 1.3% hit.

On the earnings front, Norwegian Cruise forecast annual profit below Wall Street expectations.

AES Corp AES.N fell 17.3% after a consortium led by BlackRock-owned BLK.N Global Infrastructure Partners and equity firm EQT AB EQTAB.ST agreed to acquire the utilities company for $33.4 billion at a discount to its last close.

Crypto stocks Coinbase COIN.O and Strategy MSTR.O rose more than 5% each as bitcoin BTC= rallied.

Declining issues outnumbered advancers by a 1.46-to-1 ratio on the NYSE and by a 1.33-to-1 ratio on the Nasdaq.

The S&P 500 posted 51 new 52-week highs and three new lows, while the Nasdaq Composite recorded 70 new highs and 153 new lows.