Wall Street slides as Iran conflict sends oil prices towards $100 ahead of key US inflation data
Wall Street has slipped as escalating Middle East tensions send oil prices towards $100 a barrel and reignite inflation fears.
The major US stock indexes are edging lower as fresh hostilities in the Middle East pushed oil prices to their highest since late July, while markets await inflation data due later this week.
The declines follow a roller-coaster stretch that saw investors rushing to readjust rate-hike expectations after commentary from Federal Reserve Governor Christopher Waller and a stronger-than-expected jobs report.
The truncated week after the Labor Day holiday will be dominated by the Consumer Price Index report due on Friday and the Producer Price Index reading on Thursday.
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By continuing you agree to our Terms and Privacy Policy.Some investors have said inflation readings will hold more weight for the Fed’s rate trajectory, given Chair Kevin Warsh’s focus on bringing prices down.
“It still seems to be a bit of a wild card out there. Warsh is not as easily readable as his predecessor Jerome Powell was,” said Michael Matousek, head trader at US Global Investors. With oil potentially climbing further, market volatility could persist, he added.
Traders now see a 58.4 per cent chance of an increase in interest rates this month, according to the CME FedWatch tool.
In early trading on Tuesday, the Dow Jones Industrial Average fell 451.93 points, or 0.85 per cent, to 52,962.32, the S&P 500 lost 29.15 points, or 0.38 per cent, to 7,689.45 and the Nasdaq Composite lost 111.18 points, or 0.42 per cent, to 26,395.81.
Now in its seventh month, the US-Iran war has remained an overhang on equities. Tensions flared up again in the region, raising the risk of a wider conflict.
Brent crude futures neared $US100 ($A138) a barrel and were at their highest since late July, as Yemen’s Tehran-backed Houthis attacked energy facilities and cities in US ally Saudi Arabia on Tuesday.
Shipping traffic through the Strait of Hormuz slowed, with Iran threatening on Monday to retaliate for any new US attacks.
The oil rally is turning the inflation picture “murkier,” said Kyle Rodda, senior financial market analyst at Capital.com. “The military activity is maintaining a significant risk premium in energy markets amidst the heightened possibility of deeper and more protracted disruptions to global supply.”
Energy was the best-performing sector on the S&P 500, rising 1.49 per cent, with Marathon Petroleum and Occidental Petroleum up 1.85 per cent and 2.07 per cent, respectively.
Utilities and basic materials also gained 0.7 per cent and 0.1 per cent, respectively.
Elevated yields on risk-free US Treasuries have in recent weeks made it less attractive for investors to take on the added risk of buying stocks.
The yield on the benchmark 10-year Treasury note rose 0.42 basis points to 4.7882 per cent on Tuesday.
Crypto stocks fell as bitcoin retreated from the $US80,000 ($A110,744) level. Coinbase fell 2.84 per cent while Strategy was down 3.96 per cent.
Chipmakers rose, helped by optimism around AI. Intel gained 5.99 per cent, while Qualcomm added 5.14 per cent after the company struck a $US4 billion ($A5.5 billion) deal with Amazon to develop custom AI chips.
Declining issues outnumbered advancers by a 1.41-to-1 ratio on the NYSE and by a 1.62-to-1 ratio on the Nasdaq.
The S&P 500 posted three new 52-week highs and four new lows while the Nasdaq Composite recorded 27 new highs and 57 new lows.
