A flare-up in geopolitical tensions lifted oil prices while fueling losses in stocks and bonds, with Wall Street also rattled by a renewed selloff in some the world’s largest technology companies.
Those worries put the S&P 500 on track for a five-week low, with the benchmark dropping 1.5%. A closely watched gauge of chipmakers fell 4%. US crude settled around $90 as President Donald Trump vowed to strike Iran again and scolded the country for delaying talks on an interim peace deal, following overnight strikes that put further strain on a fragile two-month truce.
“We’re going to be attacking them, attacking them very hard,” Trump told reporters at the White House Wednesday. “We hit them hard yesterday, and we’re going to hit them hard again today.”
Increased tensions in the Middle East risk derailing intermittent indirect talks between Iran and the US. That means the path to a deal allowing for the re-opening of the Strait of Hormuz is clouded, stoking concern over inflationary pressures that could make the Federal Reserve raise rates before the year is over.
“Investors had been banking on a quick peace deal in the Middle East,” said Bret Kenwell at eToro. “The trouble is, the longer it takes to find a resolution, the more likely oil prices remain elevated. And the longer energy prices stay elevated, the stickier inflation can get.”
Those worries overshadowed relatively tame data on consumer prices that had earlier brought a degree of relief to traders. While US inflation accelerated in May to the fastest pace in more than three years, the core measure rose by less than forecast.
“It’s very possible that things wrap up in the Middle East and shipping gets back to normal over the course of the rest of the year, in which case we can see inflation come down over time and the Fed could hold off raising rates,” said Chris Zaccarelli at Northlight Asset Management. “But if things stay as they are currently, then all bets are off.”
Meantime, warnings of a bubble have been loudest in parts of the market riding the artificial-intelligence wave, where many of the Magnificent Seven megacaps and semiconductor firms have delivered strong returns.
Investors are also preparing for a wave of new equity supply unlike anything seen in recent history. A flood of shares from companies seeking capital to fund AI ambitions is raising questions across Wall Street about whether demand will be sufficient to absorb the issuance and what the implications will be for broader equity valuations.
“Following the historic run, the group earned a well-needed breather, with profit taking necessary to keep positions within risk parameters,” said Mark Hackett at Nationwide. “Also, beginning with the Google offering last week, the SpaceX IPO this week, and likely offers from Meta, OpenAI, and Anthropic, institutional and retail investors are likely raising funds to participate.”
Corporate Highlights:
- SpaceX · ’s initial public offering has attracted demand for more than four times the available shares, according to people familiar with the matter, ahead of the Elon Musk-led rocket, satellite and AI firm stopping taking orders.
- Super Micro Computer Inc. sank after the company announced a plan to raise $7 billion through a package of equity offerings, a move meant to help pay for the production of more AI servers.
- Shares of several large trucking · companies plunged after Amazon.com Inc. announced an expansion of its shipping service that has already shaken the transportation and logistics sector and unsettled investors.
- JPMorgan Chase & Co., Barclays Plc and Fifth Third Bancorp won dismissal of a fraud lawsuit filed by holders of notes issued by Tricolor Holdings, the bankrupt subprime auto lender.
- Cracker Barrel Old Country Store Inc. surged after raising its full-year revenue guidance and saying declines in store traffic are moderating.
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What Bloomberg Strategists say...
“Traders are taking the escalation in US-Iran tensions with a grain of salt. President Trump’s tendency to escalate to de-escalate is all too familiar for investors by now.”
—Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
- The S&P 500 fell 1.6% as of 3:29 p.m. New York time
- The Nasdaq 100 fell 2.1%
- The Dow Jones Industrial Average fell 1.7%
- The MSCI World Index fell 1.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was unchanged at $1.1543
- The British pound was little changed at $1.3372
- The Japanese yen fell 0.1% to 160.53 per dollar
Cryptocurrencies
- Bitcoin fell 0.7% to $61,670.02
- Ether fell 2.1% to $1,624.73
Bonds
- The yield on 10-year Treasuries advanced two basis points to 4.54%
- Germany’s 10-year yield advanced three basis points to 3.08%
- Britain’s 10-year yield advanced three basis points to 4.93%
Commodities
- West Texas Intermediate crude rose 2.4% to $90.35 a barrel
- Spot gold fell 4.2% to $4,083.05 an ounce