Stocks dropped on Friday and oil prices jumped after Israel struck Iran and Iran appeared to strike back against Israel. The Dow Jones industrial average fell 1.8 percent while the S&P 500 lost 1.1 percent and the Nasdaq was down 1.3 percent. US Treasury yields and the dollar rose along with oil prices on the Middle East fighting.

The market began to sell off on Thursday night on news of Israel's massive attack against Iranian nuclear targets, military facilities and military leaders. The stock losses increased late Friday on news that Iran had fired rockets at Israel including some that struck Tel Aviv. Worry that the conflict will escalate further and draw in other countries added to the negative market reaction. Iran has threatened to target US assets in any reprisals for the Israeli strikes but it has not yet done so.

Interestingly, US bonds sold off rather than gaining in a flight to quality as investors focused on inflation concerns linked to rising oil prices.

Among sectors, risky stocks including big technology stocks that have led the market's recent advance were among the hardest hit on Friday. Energy and defense shares outperformed.

Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.

Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.