Wall Street ended lower on Wednesday as escalating tensions in the Middle East pushed oil prices higher, fuelling fresh concerns over inflation and the prospect of higher interest rates in the United States.
The Dow Jones Industrial Average fell 620.72 points, or 1.21%, to 50,687.07, while the S&P 500 lost 0.74% to 7,553.72 and the Nasdaq Composite declined 0.89% to 26,853.98.
Investor sentiment weakened after renewed hostilities between the US and Iran raised fears of prolonged disruptions to global energy supplies. Rising crude prices added to concerns that inflation could remain elevated, reducing the likelihood of interest rate cuts and potentially increasing the chance of future rate hikes.
Brent crude climbed to around US$95 per barrel, extending its recent gains as markets continued to monitor developments around the Strait of Hormuz, a critical route for global oil shipments.
According to CME FedWatch data cited by Reuters, markets are now pricing in a 41.1% probability of a US Federal Reserve rate hike by December, compared with just 9.1% a month ago.
The sell-off was led by financial and technology stocks, although artificial intelligence-linked semiconductor counters continued to outperform. The Philadelphia Semiconductor Index gained 1.4%, with shares of Marvell Technology, Intel, Qualcomm and Sandisk advancing between 3.7% and 6.7%.
Energy stocks emerged as the main beneficiaries of the oil rally, posting the strongest gains among the S&P 500 sectors.
Analysts said markets remain caught between resilient US economic data and growing geopolitical risks, with the duration of disruptions in the Middle East likely to determine the outlook for inflation, monetary policy and global financial markets in the months ahead.
