Wall Street ‘fear gauge’ flashes as volatility dogs U.S. stocks

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Cboe Volatility Index spiked overnight as tensions between Iran and Israel escalated

A cocktail of interest rate anxiety and geopolitical tensions is keeping U.S. stock investors defensive and driving Wall Street’s most closely watched volatility gauge to its highest level in half a year.

Often called Wall Street’s “fear gauge,” the VIX is an options-based measure of investor demand for protection against near-term stock swings. It has climbed in recent weeks as signs of stubborn inflation eroded expectations for how deeply the Federal Reserve will cut interest rates this year and as worries grow over a spreading conflict in the Middle East.

Nevertheless, some believe a jump in volatility is warranted following a run that has seen the S&P 500 gain as much as 28% from its October lows. “You put some challenges in its way, such as, rising interest rates and a potential war ... it makes a lot of sense to back off,” he said.Stocks were weaker on Friday after reports Israel launched an attack on Iranian soil, in the latest tit-for-tat exchange between the two foes. The S&P 500 was recently down 0.4%, on pace for its sixth straight session of losses, the longest losing streak since October 2022.

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