All three major indexes on Wall Street fell in unison as heightened geopolitical tensions in the Middle East coincided with a sell-off in artificial intelligence (AI) tech stocks. After President Donald Trump signaled strong additional strikes against Iran, global oil prices jumped, stoking inflation fears and chilling investor sentiment.
On the 10th (local time) at the New York Stock Exchange, the blue-chip Dow Jones Industrial Average fell 953.33 points, or 1.87%, to close at 49,918.78. The large-cap-focused Standard & Poor's (S&P) 500 fell 119.66 points, or 1.62%, to 7,266.99. The tech-heavy Nasdaq composite also plunged 509.32 points, or 1.98%, to 25,169.50.
The market came under pressure as the United States and Iran resumed military clashes that day. President Trump pointed to Iran as being behind the downing of a U.S. Apache helicopter that was flying over the Strait of Hormuz in the Persian Gulf the previous day. Trump warned on the social media platform Truth Social that "Iran dragged out negotiations for far too long and will pay a massive price." U.S. Central Command also said it "carried out strikes on Iran in response to the helicopter downing," further ratcheting up tensions.
With war jitters intensifying, global oil prices reacted immediately. West Texas Intermediate (WTI) futures rose 2.07% to $90.03 a barrel, and Brent crude also finished up 1.8% at $93.10.
Experts warned of the shockwaves markets would have to absorb if the Middle East crisis drags on. Jed Ellerbroek, a portfolio manager at Argent Capital Management, said, "A war with Iran is a very serious matter," and noted, "It is impossible for investors to feel comfortable in the current investment environment." Brett Kenwell of eToro also said, "Investors had hoped for a swift peace deal in the Middle East, but the longer a resolution takes, the more likely oil prices are to stay elevated."
Rising oil prices feed into inflation pressures. The U.S. Bureau of Labor Statistics released May's consumer price index (CPI) as up 4.2% from a year earlier. That is the highest in three years. The core inflation rate, excluding volatile food and energy, came in at 2.9%, in line with market expectations. But surging energy costs pushed overall prices higher, effectively erasing gains in Americans' real wages. For the Federal Reserve, which must control inflation, cutting rates has become more difficult. Chris Zaccarelli of NorthEnder Asset Management said, "If the Middle East situation is resolved and logistics normalize, the Federal Reserve could hold off on rate hikes, but if the current situation persists, all predictions become meaningless."
On top of that, AI tech stocks that had led the market's rise tumbled across the board, accelerating the indexes' decline. The S&P 500 technology institutional sector fell 2.3%. Chip corporations, in particular, saw steep losses. Major semiconductor names including Micron Technology, AMD and Broadcom all fell. The iShares Semiconductor exchange-traded fund (ETF), which bundles semiconductor-related stocks, plunged more than 3%.
The market is increasingly worried that AI-related stocks have climbed too far, too fast, creating a bubble. AI corporations are supplying shares to the market through measures such as capital increases and equity sales, worsening supply-demand pressures. Super Micro Computer, which makes AI server computers, said it would raise $7 billion through a stock offering, after which its shares plunged more than 20%. Mark Hackett of Nationwide said tech stocks were catching their breath after a historic rally, and analyzed that investors are selling existing shares to raise cash to take part in large funding rounds, including the SpaceX listing led by Elon Musk and those by Google and Meta.
Stock performances diverged sharply on company-specific developments. After Amazon said it would open its cargo delivery network to outside corporations, existing logistics corporations were hit hard. Old Dominion Freight Line fell more than 6%, and shares of major freight haulers including ArcBest and Saia also slid across the board. By contrast, Cracker Barrel, a Southern U.S. homestyle restaurant chain, posted a surprise profit that beat expectations and raised its full-year guidance, sending its shares soaring more than 24%.