Stocks slumped to a second consecutive weekly loss on Friday, as intensifying tension in the Middle East prompted caution among investors, adding to concerns about lingering inflation that had set off a retreat earlier in the week.

The S&P 500 fell 1.5 percent on Friday in its worst day of trading since January, and ended the week with a drop of 1.6 percent, its worst weekly decline of the year.

Other major indexes, including the Nasdaq Composite and Russell 2000, also fell on Friday. The Vix Volatility Index, a measure of investor expectations for market swings over the next 30 days — known across trading floors as Wall Street’s “fear gauge” — was elevated.

The drop this week began after an inflation report on Wednesday showed unexpectedly stubborn increases in consumer prices, throwing into doubt the likelihood that the Federal Reserve will cut interest rates in the near future as the central bank seeks to keep the brakes on the economy and further slow the pace of rising prices.

The rally in stocks this year, which has seen the S&P 500 climb to record territory, has come in part as investors bet on interest rates dropping by the end of 2024. Since the inflation report on Wednesday, traders in the futures market have scaled back those bets.

Investors were also moving to protect their investment portfolios, with U.S. and Iranian officials warning on Friday that Iran is likely to launch an attack on Israel in the coming days in retaliation for Israel’s killing of several Iranian commanders in Damascus, Syria.

Several countries including the United States have issued new travel guidelines for Israel and the surrounding region. Stock investors have mostly looked past the crisis this year, but the risk of a wider conflagration was fueling some of the trading Friday.

“We see significant interest in hedging exposure to potential events in the Middle East over the weekend, as investors look for protection while markets are closed,” said Robert Knopp, co-head of the S&P options desk at Optiver in Chicago.

Worries drove demand for haven assets, with the 10-year Treasury yield, which moves inversely to its price, falling 0.07 percentage point to 4.5 percent.

The cloudy outlook also outweighed better-than-expected results from some of the nation’s biggest banks, with JPMorgan warning of muted growth for the rest of the year. The bank’s shares dropped 6.5 percent on Friday.