NEW YORK — U.S. equity markets closed sharply lower on Thursday as two converging forces unsettled investor confidence: a major alternative-asset manager disclosed a sweeping $1.4 billion loan sale coupled with a fundamental restructuring of retail investor access to one of its private credit funds, while President Donald Trump warned he would decide within ten days whether to launch military action against Iran, a declaration that pushed crude oil prices to their highest intraday level of the year and accelerated a shift toward safer assets.

The S&P 500 lost 0.28% on the session, placing the index near flat for the calendar year. The Dow Jones Industrial Average declined 0.54%, and the Nasdaq Composite fell 0.31%. Financial and software stocks bore the steepest losses, while energy shares outperformed as oil prices climbed nearly 2% during U.S. trading hours. The combination produced a textbook risk-off session, with the moves reflecting not any single shock but the compounding weight of overlapping uncertainties.

A $1.4 Billion Loan Sale Tests Private Credit's Foundations

At the center of Thursday's anxiety was a portfolio sale executed across three business development companies, or BDCs, operated by Blue Owl Capital, a major alternative-asset manager based in New York. The loans, spread across 128 distinct portfolio companies in 27 different industries, were sold to four North American pension funds and insurance investors at 99.7% of par value as of February 12. Blue Owl described the near-par pricing as a validation of its internal loan marks, arguing that sophisticated institutional buyers were willing to purchase assets at close to face value, a signal of confidence that stands in direct contrast to the concerns driving redemption pressure at the fund level.

The largest portion of the transaction, $600 million, came from Blue Owl Capital Corporation II, known as OBDC II, a semi-liquid private credit fund marketed to U.S. retail investors that held a total investment portfolio of approximately $1.7 billion. That $600 million represented roughly 34% of OBDC II's total investment commitments. The fund's board announced simultaneously that it would end regular quarterly tender offers for investors seeking to exit their positions, replacing that mechanism with periodic return-of-capital distributions funded by earnings, asset sales, repayments, and other strategic transactions. Blue Owl Capital Corporation and Blue Owl Technology Income Corp each sold $400 million in assets, representing approximately 2% and 6% of their respective portfolios, with no changes made to their redemption structures. The proceeds across all three funds will be directed toward paying down debt, with OBDC II also intending to distribute up to $2.35 per share, or roughly 30% of its net asset value as of December 31, 2025, to shareholders on or before March 31, 2026.

Why the Liquidity Overhaul Rattled Markets

The structural change to retail investor access triggered an immediate and disproportionate market reaction because it touched on a vulnerability that credit analysts have monitored for years. Private credit, broadly understood as direct loans extended by non-bank lenders to companies outside the public bond markets, has grown into a roughly $3 trillion global asset class. Business development companies, the investment vehicles that channel this lending primarily to small and mid-sized firms, have seen their investor base shift steadily away from institutional ownership toward retail capital. Research from Duke University's Fuqua School of Business, published in September 2025, showed that institutional ownership of BDC shares had fallen to roughly 25% on average by 2023, meaning that three-quarters of BDC equity capital is now supplied by retail investors who typically expect more regular and reliable access to liquidity than institutional allocators.

The fundamental tension is structural. Private credit funds operate with multi-year loan commitments that do not naturally align with quarterly redemption windows. When confidence erodes and redemption requests surge simultaneously, the mismatch between the duration of assets and the expectations of investors becomes acute. OBDC II had faced a rise in redemption requests since late 2025, and a prior attempt to merge the fund with the larger publicly traded Blue Owl Capital Corporation fell apart after investors balked at terms that could have imposed losses of roughly 20%. Blue Owl Capital's shares fell nearly 6% on Thursday, and shares of other large alternative-asset managers, including Blackstone and Apollo Global Management, also retreated as investors reassessed exposure to the private credit sector more broadly.

Iran and Oil Add a Geopolitical Dimension

Compounding the strain from the private credit episode was a fresh escalation in tensions between Washington and Tehran. President Trump told reporters Thursday that he would reach a decision within ten days on whether to take military action against Iran. The previous day, senior White House officials had described multiple rationales for a potential strike. The comments were enough to move markets immediately. Oil prices rose nearly 2% during U.S. trading hours on Thursday, with West Texas Intermediate futures setting a new intraday high for 2026. The concern driving that move centered on the Strait of Hormuz, a narrow waterway in the Persian Gulf through which a substantial portion of global crude oil transits on its way primarily to Asian markets. Any sustained disruption of that passage, or even credible threats of disruption, reliably introduces a risk premium into energy prices that reverberates across the broader economy.

Higher oil prices present a double-edged outcome for markets. They provide a lift to energy-sector earnings, which partly offset losses in Thursday's session. But they simultaneously function as an inflationary tax on other sectors, compressing household spending expectations, pressuring transportation companies dependent on fuel costs, and complicating the Federal Reserve's already cautious posture on rate reductions. Fed minutes released the prior day had struck a hawkish tone, with policymakers signaling a preference to wait for further evidence of cooling inflation before considering additional cuts, a stance reinforced rather than softened by a spike in oil prices.

Japan's Inflation Data Complicates the Rate Narrative

Across the Pacific, Japan released consumer price data on Friday morning local time that introduced its own complexity into the global rate outlook. Headline inflation fell to 1.5% year-over-year in January, down from 2.1% in December and the lowest reading since March 2022. The figure ended a run of 45 consecutive months during which Japan's headline inflation had held above the Bank of Japan's 2% target, a streak that had underpinned the central bank's argument for a gradual exit from its ultra-loose monetary policy stance.

Core inflation, which excludes fresh food prices and is the Bank of Japan's preferred benchmark for policy decisions, fell to exactly 2.0%, matching economist consensus but representing a meaningful decline from 2.4% in December. A secondary gauge stripping out both fresh food and energy costs declined to 2.6% from 2.9%. The deceleration was primarily driven by government energy subsidies, a slowdown in rice price increases, and the broader disinflation effects of Prime Minister Sanae Takaichi's policy platform, which includes plans to suspend food taxes. Despite the softer headline reading, most economists expect the Bank of Japan to continue its gradual rate-hiking trajectory, given that core-core inflation remains above target and is expected to rebound later in the year as government relief measures are absorbed into price baselines.

Separately, shares of Japanese pharmaceutical company Sumitomo Pharma declined more than 12% on Friday in Tokyo, a decline that appeared counterintuitive against a backdrop of favorable regulatory news. A government specialist panel had endorsed a conditional seven-year approval for the company's stem cell-based therapy for Parkinson's disease on Thursday, a milestone built on induced pluripotent stem cell technology. The therapy uses adult cells reprogrammed back into a stem-cell-like state, then directed to replace damaged neural tissue, a process that represents a genuinely novel approach to treating a degenerative neurological condition. The approval, however, had been anticipated by a market that had already driven Sumitomo Pharma's shares up more than 300% during 2025. Analysts noted that near-term profit contribution from the therapy would be minimal, and Friday's decline was characterized broadly as profit-taking by investors locking in gains ahead of any commercial uncertainty. In European trading, Airbus fell roughly 6% after providing delivery guidance for 2026 that was more conservative than analysts had expected, attributed to persistent supplier-driven engine shortages. Analysts covering the European aerospace sector maintained constructive medium-term views, arguing that the shortfall reflected a logistical bottleneck rather than any deterioration in underlying demand for commercial aircraft.

Written by Nick Ravenshade for NENC Media Group, original article and analysis.

Photo: Larry Nalzaro / Unsplash