United States benchmarks fell on Tuesday (Wednesday AEST), pressured by escalating tensions in the Middle East and disappointing retail sales data.
The Dow Jones Industrial Average dropped 299.3 points or 0.7% to finish at 42,215.8, the S&P 500 declined 50.4 points or 0.8% to close at 5,982.7, while the Nasdaq Composite fell 180.1 points or 0.9%, ending the session at 19,521.1.
Investors remained focused on the conflict between Israel and Iran, which entered its fifth consecutive day. Rhetoric from President Donald Trump added to market anxiety. In a series of posts on Truth Social, Trump issued a stark warning to Tehran and its leadership.
“We know exactly where the so-called ‘Supreme Leader’ is hiding,” he wrote. “He is an easy target, but is safe there - We are not going to take him out (kill!), at least not for now. But we don’t want missiles shot at civilians, or American soldiers. Our patience is wearing thin.”
He also demanded “UNCONDITIONAL SURRENDER!”, further escalating the tone of the ongoing crisis.
Amid the rising tensions, Trump met with his national security team in the White House Situation Room on Tuesday afternoon.
Simultaneously, the Pentagon redeployed military assets to the Middle East in a bid to bolster defensive capabilities and offer Trump broader military options.
On Monday, Trump had urged civilians to evacuate Iran’s capital, writing, “Everyone should immediately evacuate Tehran.”
He also cut short his attendance at the G7 summit in Canada, departing without finalising trade agreements with several member nations, as the crisis in the Middle East took precedence.
As geopolitical concerns intensified, oil prices surged, reversing Monday’s pullback that followed signs Iran was open to a ceasefire with Israel.
Both West Texas Intermediate (WTI) and Brent crude futures rallied more than 4%, as energy traders priced in potential supply disruptions stemming from a broader regional conflict.
Adding to the gloom, fresh retail sales data from May revealed a sharper-than-expected drop in consumer spending. Sales declined 0.9% month-over-month, worse than the 0.7% fall expected.
This unexpected decline raised questions about the resilience of the U.S. consumer, a key driver of the country’s economic growth.
Despite weak consumer data, markets are still anticipating two quarter-point rate cuts this year, beginning in September, according to the CME Group FedWatch Tool.
Treasury yields ticked down as investors rotated into safe-haven assets. The 10-year yield dipped 1.4% to 4.387%, while the 2-year yield fell 0.7% to 3.946%.
