Wall Street closed mostly lower on Wednesday as renewed US military action and President Donald Trump’s hardening stance towards Iran pushed oil prices higher, unsettling investors.
After tankers came under fire in the Strait of Hormuz, Trump said a provisional peace deal with Iran was over and hinted at heavy reprisal attacks. Later on Wednesday evening, the US military carried out further strikes on Iran.
Oil prices extended their gains on wholesale markets after already rising on Tuesday as tensions in the Middle East intensified. Concerns that higher energy costs could prolong inflation weighed on sentiment across financial markets.
The Dow Jones Industrial Average fell 1.1% to 52,348.39. The broader S&P 500 lost 0.3% to end on 7,482.71. The tech-heavy Nasdaq bucked the trend, rising 0.2% to 25,870.65, helped in part by a strong session for chipmakers.
The S&P 500, widely seen as the main benchmark for New York equities, recovered some of its losses during the trading session.
Fears of a prolonged period of elevated inflation also hit government bonds, sending prices lower and yields higher. According to AFP, yields on French 10-year government debt climbed to their highest level since June 2009.
Investors were also digesting the minutes of the Federal Reserve’s latest policy meeting, which showed that some officials believed there were solid arguments for raising borrowing costs.
In the end, the US Central Bank voted unanimously in June to leave interest rates unchanged.
Higher oil prices dragged down shares in major airlines and cruise operators, while many energy stocks moved higher.
