Updates to U.S. market close

By Sabrina Valle and Johann M Cherian

March 5 (Reuters) - U.S. stocks closed down on Thursday as the Middle East conflict entered its sixth day, pushing oil prices higher and spurring worries about inflation and whether the Federal Reserve will cut interest rates.

Expansion of the conflict to more countries fed fears of disruption in the Strait of Hormuz, a critical energy choke point, where missile and drone threats have drastically reduced tanker traffic.

This lifted U.S. crude prices CLc1 8.5% to $81 per barrel, the highest since July 2024. Global benchmark Brent LCOc1 crude rose 4.9% to $85.41. Traders worry a prolonged interruption could feed inflation and slow economic growth.

"Look at oil today, it tells you everything you need to know about why the stock market's down," said Michael Antonelli, market strategist at Baird Private Wealth Management. "The market is really trying to grapple with how long this conflict will last".

The Dow Jones Industrial Average .DJI fell 784.67, or 1.61%, to 47,954.74 points, the S&P 500 .SPX lost 0.56%, to 6,830.71 points and the Nasdaq Composite .IXIC closed down 0.26%, to 22,748.99 points.

The S&P 500 indexes that track performance of major U.S. companies in the industrials, materials and healthcare sectors fell more than 2% each. The passenger airlines sub-sector .SPCOMAIR tumbled 5.4%, with Southwest Airlines Co LUV.N down 6.9%.

Limiting losses were energy and technology stocks. The S&P 500 index which tracks the performance of major U.S. energy companies rose 0.6% with the prospect of higher revenue on energy prices. Chevron gained 3.9%.

S&P technology stocks rose 0.4%. Shares of chip designer Broadcom <AVGO.O> rose 4.8% after it projected its artificial intelligence chip revenue would exceed $100 billion next year.

With the U.S.-Israeli air war against Iran raging, Wall Street has outperformed its European and Asian counterparts this week, aided primarily by technology stocks that bore the brunt of February's selloff. The Nasdaq is 0.36% up since the conflict started.

Any signs that crude prices could hit $100 a barrel would be worrisome, and investors were on the lookout for reports that the conflict could be nearing its end.

Data showed the number of Americans filing new applications for unemployment benefits was unchanged last week.

Stronger‑than‑expected ISM manufacturing and services results helped push investors’ unofficial payroll expectations higher, said Steve Ricchiuto, chief economist at Mizuho Securities. Stronger economy signs reduce chances of interest rate cuts.

"People are looking at the payroll numbers for tomorrow. Data (today) suggests maybe the labor market is still better than expected," he said. "But after today's selloff, I am less convinced that it's going to have the impact that I thought it would have. The market already pre-discounted it."

Markets are currently pricing in roughly 40 basis points of cuts from the Fed this year, down from about 50 basis points before the war began, according to LSEG data.

Declines in financials such as JPMorgan Chase JPM.N and Goldman Sachs GS.N also weighed on the blue-chip Dow.

Volume on U.S. exchanges was 22.32 billion shares, compared with the 17.82 billion average for the full session over the last 20 trading days.