The Israel-Iran conflict will continue to hang over the stock market next week, as investors wait and see whether there will be an escalation in the region. Traders will also be awaiting the latest Federal Reserve meeting. Though the initial stock response to the attack was subdued, equity losses deepened on Friday afternoon. The Dow Jones Industrial Average lost more than 800 points at one point during the session as Iran launched missiles at Israel, according to Tehran and Israel Defense Forces. It closed down more than 750 points. The worsening tensions spurred a return to risk-off sentiment in the market, just as the S & P 500 was nearing its all-time record. Oil prices surged, while defense stocks rallied. Volatility is back up, with the CBOE Volatility index on Friday briefly climbing above 20. Semiconductor stocks , which enjoyed a big rally this week, are down. Nvidia is down. Gold , which stalled a bit from its historic rally this year, has perked up again. .VIX 1D mountain CBOE Volatility Index, over one day Investors are reacting by taking money off the table heading into the weekend, worried further retaliatory actions between the two countries will mark an escalation of conflict in the region. “Markets’ reaction next week is really going to coalesce around what else we learn about the ongoing events between Israel and Iran, and if there’s escalation by either side, retaliation and/or escalation by Israel, that will likely keep a bit of a cloud on risk assets,” said Art Hogan, chief market strategist at B. Riley Wealth Management. “And only time will tell what that looks like.” On Friday, the three major averages posted a losing week . The 30-stock Dow fell 1.3%. The S & P 500 was down 0.4% on the week, while the Nasdaq Composite was off 0.6%. Fed meeting The Fed is just about universally expected to hold rates steady next week. But, more important will be what Fed Chair Jerome Powell says in his post-meeting comments, as well as what surfaces in the latest Summary of Economic Projections, in regards to how policymakers are thinking through the path forward for monetary policy. According to the CME FedWatch Tool , markets are currently pricing in two quarter percentage point rate cuts, starting in September. For the most part, investors are expecting the same consistent message from Powell, who they’re sure will reiterate that the central bank remains data dependent. This week’s cooler inflation data , for example, could give policymakers flexibility to continue watching for the impact of tariffs on the economy in upcoming reports. But, some wonder if there could be a slight dovish tilt to the Fed chair’s messaging, especially with the labor market, while still resilient, starting to show some cracks. “The market is going to be curious to hear how the Fed is assessing these dynamics of more benign inflation data, plus a slight deterioration in labor market data, and basically, does that allow them to strike more dovish tone at this meeting,” said John Belton, portfolio manager at Gabelli Funds. “I do think that the recent data supports at least a couple cuts by year end,” Belton continued. “The question is, are these going to be reactive, or is it coming from a place of confidence?” Recent Fed speak has investors more confident that central bank policymakers could start to cut as well. In late May, Fed Governor Christopher Waller told Fox Business that he sees a path for the central bank to cut interest rates in the second half of 2025, if Trump’s tariffs are down to around 10%. However, others expect the Fed may not cut as much as the market is pricing in. David Kelly, chief global strategist at J.P. Morgan Asset Management, said he anticipates just one rate cut this year, worried that the reconciliation bill, pushed through when the consumer remains robust, will be inflationary for the economy. “That, I think, is something the Federal Reserve is very focused on,” Kelly said. “Whatever they pretend about cutting the deficit in the long run, in fact, what they’re going to do is expand the deficit quite a lot in 2026 relative to where it was in fiscal 2025 and the Fed doesn’t want to be stimulating, or be further stimulating, in an already over stimulated economy.” Next week will also be a shortened trading week, with markets closed Thursday for the Juneteenth national holiday. Week ahead calendar All times ET. Monday, June 16 8:30 a.m. Empire State Index (June) Bond market: Auction 20-year bond Earnings: Lennar Tuesday, June 17 8:30 a.m. Export Price Index (May) 8:30 a.m. Import Price Index (May) 8:30 a.m. Retail Sales (May) 8:30 a.m. Capacity Utilization (May) 9:15 a.m. Industrial Production (May) 9:15 a.m. Manufacturing Production (May) 10 a.m. Business Inventories (April) 10 a.m. NAHB Housing Market Index (June) Bond market: Auction 5-year TIPS Earnings: Jabil Wednesday, June 18 8:30 a.m. Building Permits preliminary (May) 8:30 a.m. Continuing Jobless Claims (06/07) 8:30 a.m. Housing Starts (May) 8:30 a.m. Initial Claims (06/14) 2 p.m. FOMC Decision 2 p.m. Fed Funds Target Upper Bound Thursday, June 19 Markets closed for Juneteenth National Independence Day Friday, June 20 8:30 a.m. Philadelphia Fed Index (June) 10 a.m. Leading Indicators (May) Earnings: Darden Restaurants, CarMax , Kroger