A federal judge in California has blocked the Trump administration from designating Anthropic as a supply chain risk to national security and cutting off the AI company’s work with federal agencies.

Anthropic sued the Defense Department and other federal agencies this month after the Pentagon labeled it a “supply-chain risk to national security.” President Donald Trump said he would also ban the use of Anthropic’s products across other federal agencies.

“Defendants’ designation of Anthropic as a ‘supply chain risk’ is likely both contrary to law and arbitrary and capricious,” U.S. District Judge Rita Lin of Northern California wrote in her order Thursday night. “The Department of War provides no legitimate basis to infer from Anthropic’s forthright insistence on usage restrictions that it might become a saboteur.”

Lin paused her order for a week to allow the administration time to appeal.

The Defense Department and the White House did not immediately respond to a request for comment Thursday evening.

“We’re grateful to the court for moving swiftly, and pleased they agree Anthropic is likely to succeed on the merits,” an Anthropic spokesperson said in a statement Thursday. “While this case was necessary to protect Anthropic, our customers, and our partners, our focus remains on working productively with the government to ensure all Americans benefit from safe, reliable AI.”

The supply chain risk designation requires the Pentagon and its contractors to stop using Anthropic’s commercial AI services for all defense business.

Defense Secretary Pete Hegseth said on X in late February that he was issuing a directive to give the company the “supply chain risk” label. Trump also said he was ordering all federal agencies, including the Treasury and State departments, to cease using Anthropic’s AI technology.

“The record reflects that the Challenged Actions were taken without any meaningful notice or pre-deprivation process (and, in the case of the Presidential Directive and the Hegseth Directive, without any post-deprivation process either),” Lin wrote in her order.

The order Thursday also bars other agencies from cutting off their work with Anthropic. Lin wrote that the order restores the status quo.

“This Order does not require the Department of War to use Anthropic’s products or services and does not prevent the Department of War from transitioning to other artificial intelligence providers, so long as those actions are consistent with applicable regulations, statutes, and constitutional provisions,” the order said.

Anthropic filed two lawsuits against the Defense Department — one in U.S. District Court for Northern California and the other in U.S. Circuit Court of Appeals for Washington, D.C. — alleging that the federal government’s moves go beyond a normal contract dispute and instead are an “unlawful campaign of retaliation” that followed months of heated negotiations about how the military should be able to use Anthropic’s AI systems.

Anthropic had sought stronger guarantees that the Pentagon would not use its AI systems for autonomous weapons or mass domestic surveillance.

Anthropic is the creator of the Claude chatbot system and the only AI company whose services were cleared for use on the Defense Department’s classified networks.

Hours after Hegseth’s announcement last month, OpenAI CEO Sam Altman said his company had reached an agreement with the Pentagon to use its services in classified settings.

Lin wrote: “Although Anthropic was on notice that the government objected to its contracting terms, it had no notice or opportunity to object before Defendants publicly barred it from all federal government work and blacklisted it with private companies working with the U.S. military. It also had no notice or opportunity to object to the factual basis for its designation as a supply chain risk, which it learned of in this litigation.”

U.S. stocks and bonds sold off Thursday and oil continued its weekslong upward trajectory, as optimism faded about possible peace talks or a U.S.-Iran ceasefire.

The price of U.S. crude oil rose near $95 per barrel, up more than 4%. International Brent crude rose 5%, to more than $109 per barrel. Since the war started, the cost of U.S. crude oil is up more than 40%. Since the start of the year, it has risen more than 60%.

The S&P 500 closed down by 1.7%, the Dow tumbled 470 points and the Russell 2000 ended the day down 1.7%. For the S&P 500, Thursday was its worst single day since the war began.

The Nasdaq Composite fared the worst though, and dropped nearly 2.4%, pushing the index into correction territory. A correction is when an index falls 10% or more from its most recent all-time high. As of Thursday’s close, the index is now down 10.9% from its October high.

Heating oil, a proxy for jet fuel prices, also spiked 8% on Thursday afternoon. The nationwide average price of unleaded gas was $3.98 a gallon.

Nonetheless, Trump downplayed the severity of the oil and gas price spikes.

Energy prices “have not gone up as much as I thought,” Trump said at a Cabinet meeting in Washington.

The military campaign is “not over, so maybe it’ll go up a little bit more,” Trump said. “It’s all going to come back down to where it was and probably lower.”

Trump also cast doubt on a deal with Iran. “They are begging to work out a deal,” he said. “I don’t know if we’ll be able to do that. I don’t know if we’re willing to do that.”

But analysts widely believe that oil prices will continue to remain elevated over the long run, factoring in the risk that shippers will now have to assume for oil tankers that transit through the Strait of Hormuz.

Also impacting market sentiment was a report from the Organisation for Economic Co-operation and Development, which predicted that as a result of the war with Iran, the average inflation rate for G20 countries this year would rise to 4%, up from its December prediction of 2.8%. The United States is a member of the OECD.

Bonds also sold off, driving yields higher. The 10-year U.S. Treasury bond yield rose to 4.42%. The yield on 20-year bond hit 4.97% and the 30-year yield hit 4.93%.

Treasury yields, especially for the 10-year bond, heavily influence consumer lending rates. As a result, mortgage rates have risen from around 6% at the start of the war on Feb. 28 to more than 6.5% as of Thursday afternoon.

Stock indexes in Asia had already begun to sell off overnight. China’s Shanghai index and Hong Kong’s Hang Seng index both fell 1%, while Korea’s Kospi slid 3.2%.

These indexes were also weighed down by big drops in shares of tech companies, including Samsung, after Google revealed a new, more efficient use of storage and memory systems for artificial intelligence.

The Stoxx 600 in Europe followed, closing down more than 1%. Flagship stock indexes in Germany, France and the U.K. also ended the trading session down by around 1%.

LOS ANGELES — A jury found Meta and YouTube negligent in the design or operation of their social media platforms, producing a bellwether verdict in the first lawsuit to take tech giants to trial for social media addiction.

The Los Angeles County Superior Court jury said that Meta’s and YouTube’s negligence were a substantial factor in causing harm to the plaintiff, identified in court by her initials, K.G.M., and that the companies failed to adequately warn users of the dangers of Instagram (Meta’s platform) and YouTube (which is owned by Google).

It awarded K.G.M. $3 million in compensatory damages, finding Meta 70% responsible for harm caused to the now 20-year-old plaintiff, and YouTube responsible for 30%.

The trial, which began last month in a Los Angeles County courtroom and included testimony from Mark Zuckerberg and other tech executives, was the first in a consolidated group of cases brought against Meta and other companies by more than 1,600 plaintiffs, including over 350 families and over 250 school districts.

Outside the courtroom, families who say their children were harmed by social media embraced as they celebrated the verdict, telling reporters they feel “vindicated.”

Spokespeople for Meta and Google said the companies disagree with the verdict and plan to appeal.

“Teen mental health is profoundly complex and cannot be linked to a single app,” a Meta spokesperson said. “We will continue to defend ourselves vigorously as every case is different, and we remain confident in our record of protecting teens online.”

José Castañeda, a spokesperson for Google, also said the case “misunderstands YouTube, which is a responsibly built streaming platform, not a social media site.”

In a joint statement, co-lead counsel for K.G.M. said the verdict is “a historic moment” for thousands of children and their families.

“But this verdict is bigger than one case,” the lawyers said. “For years, social media companies have profited from targeting children while concealing their addictive and dangerous design features. Today’s verdict is a referendum — from a jury, to an entire industry — that accountability has arrived.”

The jury decided on $2.1 million in punitive damages for Meta and $900,000 for YouTube, totaling $3 million. It’s a small fraction of the $1 billion in punitive damages the plaintiff’s counsel sought.

K.G.M.’s lead attorney, Mark Lanier, has said he hopes the proceedings produce transparency and accountability “so that the public can see that these companies have been orchestrating an addiction crisis in our country and, actually, the world.”

The plaintiff was a minor at the time of the incidents outlined in her lawsuit. K.G.M. testified in court that her nearly nonstop use of social media caused or contributed to depression, anxiety and body dysmorphia. It “really affected my self-worth,” she said last month.

Speaking about her social media use, K.G.M. testified that she felt she wanted to constantly be on the platforms and feared missing out if she wasn’t.

Attorneys for Meta and YouTube have disputed claims brought by the plaintiff, arguing their platforms aren’t purposefully harmful and addictive.

A spokesperson for Meta said K.G.M.’s “profound challenges” weren’t caused by social media and pointed to “significant emotional and physical abuse” that she experienced when she was younger.

In his closing argument, an attorney for YouTube said there wasn’t a single mention of addiction to that platform in K.G.M.’s medical records.

The verdict comes after jurors in a separate trial in New Mexico held Meta liable for failing to protect children from online predators and sexual exploitation on Facebook and Instagram.

The New Mexico jury found Tuesday that Meta violated the state’s consumer protection laws and ordered it to pay $375 million in civil penalties. Meta has said it disagrees with the verdict and plans to appeal.

In Los Angeles, deliberations took longer, wrapping up after nearly 44 hours over nine days. The jurors had told Judge Carolyn B. Kuhl that they were having trouble coming to a consensus on one defendant.

Social media companies have historically been shielded by Section 230, a provision added to the Communications Act of 1934 that says internet companies aren’t liable for the content users post.

K.G.M.’s lawsuit was the first civil action seeking to hold the platforms accountable for allegedly causing addiction and mental health problems.

TikTok and Snap, who were also named as defendants in K.G.M.’s lawsuit, reached settlements before the trial. They remain defendants in a series of similar lawsuits expected to go to trial this year.

Matt Bergman, founding attorney of the Social Media Victims Law Center — which is representing hundreds of plaintiffs in state and federal proceedings — said the jury’s decision Wednesday “establishes a framework for how similar cases across the country will be evaluated and demonstrates that juries are willing to hold technology companies accountable when the evidence shows foreseeable harm.”

“Families pursuing justice in other jurisdictions can now point to this outcome as proof that these claims deserve to be heard and taken seriously,” Bergman said in a statement.

Lanier told NBC News in an interview that this was the most difficult case he’s tried in his 42 years as a lawyer.

“I think the jury understood that they were the very first case in the history of our country to look at social media addiction, and they wanted to leave no question, but that they seriously considered the evidence,” Lanier said. “So they took forever, then they looked carefully at each of the questions and answered everyone was, yes, guilty.”

California Attorney General Rob Bonta also weighed in on the Los Angeles and New Mexico verdicts, writing in an X statement that California “looks forward to holding Meta accountable in our own upcoming August trial in the Bay Area.”