US stocks slumped on Wednesday as investors rushed to cut risk exposure amid a sharp jump in oil prices, heightened geopolitical tensions in the Middle East and growing caution ahead of the US Federal Reserve's policy decision.
The Dow Jones Industrial Average fell more than 800 points in morning trade, while the S&P 500 and the Nasdaq Composite also traded firmly in the red as markets digested a fresh escalation in the US-Iran conflict, rising crude prices and continued weakness in semiconductor stocks.
Oil Rally After Fresh US-Iran Escalation
According to multiple media reports, the biggest trigger for the selloff was a renewed spike in crude prices after US President Donald Trump said the US would hit Iran "hard". The move followed a statement from US Central Command (CENTCOM), which said Iran's Islamic Revolutionary Guard Corps launched multiple ballistic missiles targeting US forces in the region. According to CENTCOM, the missiles were successfully intercepted.
West Texas Intermediate crude futures surged nearly 7% to around $89.88 per barrel, while Brent crude climbed back towards the $90-a-barrel mark, reviving fears that higher energy prices could reignite inflation pressures.
The rebound in crude reversed part of this week's steep decline and raised concerns that rising fuel costs could complicate the Federal Reserve's fight against inflation.
Fed Decision Keeps Investors On Edge
Markets also turned cautious ahead of the Federal Reserve's interest rate decision later in the day, with investors closely watching Chair Kevin Warsh's comments for clues on the future policy path.
Fed funds futures indicate traders largely expect the central bank to keep interest rates unchanged in the 3.5%-3.75% range, according to CME FedWatch data. However, markets remain sensitive to any shift in the Fed's outlook on inflation or growth.
Chip Stocks Extend AI-Driven Selloff
Technology shares remained under pressure, with semiconductor stocks extending losses for a fifth straight session as investors questioned whether massive AI-related spending would translate into stronger earnings.
The iShares Semiconductor ETF (SOXX) dropped more than 4%, taking its weekly decline to roughly 10%. Micron Technology and Advanced Micro Devices each lost over 5%, while KLA Corp. slid more than 8%.
The weakness comes ahead of quarterly earnings from Meta Platforms Inc. and Microsoft Corp., with investors expected to closely scrutinise AI spending, capital expenditure and returns from the ongoing artificial intelligence boom.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
