Wall Street falls as oil surge fuels inflation fears, Dow Jones down 200 points

Wall Street closed lower on Thursday as rising oil prices and escalating geopolitical tensions in the Middle East dampened investor sentiment and clouded the outlook for interest rate cuts.

The S&P 500 fell 0.27% to 6,606.49, while the Nasdaq Composite slipped 0.28% to 22,090.69.

The Dow Jones Industrial Average dropped 0.44%, or 203.72 points, to 46,021.43.

All three major indexes extended losses for a second consecutive session, though they pared steeper declines seen earlier in the day.

Oil surge reignites inflation concerns

Investor focus remained firmly on the inflationary impact of rising energy prices following intensifying conflict involving Iran, Israel, and the United States.

Oil prices surged earlier in the session after Iran targeted energy infrastructure in the region, raising fears of prolonged supply disruptions.

Brent crude settled up about 1.2% at $108.65 per barrel, its highest close since July 2022, while US West Texas Intermediate crude futures edged down 0.2% to $96.14 per barrel after pulling back from earlier gains.

Federal Reserve Chair Jerome Powell’s recent remarks reinforced concerns about inflation.

The central bank left rates unchanged, but warned of ongoing uncertainty tied to geopolitical developments.

Interest rate futures now suggest traders see little chance of rate cuts before mid-2027, according to CME’s FedWatch tool, reflecting a sharp shift in expectations.

Tech and auto stocks drag markets lower

Losses in major technology and consumer stocks contributed to the broader market decline.

Micron Technology dropped 3.8% after issuing a quarterly forecast that disappointed investors, despite strong gains earlier this year driven by AI-related demand.

Nvidia fell 1%, while Tesla declined 3.2% after US regulators escalated a probe into its Full Self-Driving system, citing concerns about performance in poor visibility conditions.

Eight of the 11 S&P 500 sectors ended lower, led by a 1.55% drop in materials and a 0.87% decline in consumer discretionary stocks.

Mining companies also came under pressure as precious metal prices retreated, with Newmont falling 6.9% and Freeport-McMoRan down 3.3%.

Market breadth remained weak, with declining stocks outnumbering advancers by a 1.4-to-one ratio on the S&P 500.

The Nasdaq recorded 276 new lows compared with just 30 new highs, highlighting persistent selling pressure.

Geopolitical risks cloud market outlook

Geopolitical developments continued to dominate market sentiment, particularly the disruption of shipping through the Strait of Hormuz, a key global oil transit route.

While oil prices eased slightly after comments from Israeli Prime Minister Benjamin Netanyahu suggesting the conflict could end sooner than expected, uncertainty remains high.

Investor sentiment has shifted as the conflict drags on. “For the first couple of weeks of the war, people thought, ‘Okay, this is terrible. How can you not have the Strait open. This is going to cause major supply disruptions.’ But there was always this belief that, ‘It’s going to end very soon. It’s going to end any day. This is not sustainable,’” said Peter Boockvar, chief investment officer at One Point BFG Wealth Partners in a CNBC report.

“Now, as the conflict approaches its fourth week, the current circumstances have left investors thinking, ‘Well, maybe this doesn’t end so fast, and even when it does, we’re certainly not going back to levels in commodity prices prior to the beginning of the war,’” he added.

With inflation risks rising and monetary policy expectations shifting, markets appear increasingly sensitive to developments in energy prices and geopolitical stability.