Wall Street tumbles as renewed Middle East tensions shake investor sentiment

Wall Street's major indexes fell on Wednesday after US President Donald Trump declared that the temporary agreement aimed at ending the war with Iran was "over," while gains in Broadcom helped cushion losses in semiconductor stocks that have come under heavy pressure in recent days.

Investors reassess geopolitical risks as oil surges and Fed minutes loom

Speaking at the NATO summit, Trump said he no longer wanted to continue dealing with Iran, while warning that Washington could launch additional strikes against the country later on Wednesday.

Trump's remarks added another chapter to a conflict that has swung repeatedly between military escalation and diplomatic efforts, unsettling investors who had repeatedly bet on the prospect of a lasting agreement only to see those hopes quickly fade.

"The key question now is whether these developments mark a complete collapse of negotiations and a return to military confrontation, or whether they are simply a temporary setback," said Matthew Ryan, Head of Market Strategy at Ebury.

In the technology sector, Broadcom shares climbed 3% after Apple announced plans to spend more than $30 billion under a chip supply agreement signed with the company earlier this week.

The gains in semiconductor stocks helped limit losses in the tech-heavy Nasdaq, while the Philadelphia Semiconductor Index (SOX) rose 1.4%.

Meanwhile, oil prices extended their rally following Trump's comments, with both Brent and US West Texas Intermediate crude futures climbing more than 5%.

Nine of the 11 major sectors in the S&P 500 traded lower, with only the energy and information technology sectors posting gains.

Travel stocks decline as IMF cuts global growth forecast

Travel-related stocks came under pressure as higher oil prices fueled concerns over rising fuel costs and weaker demand.

United Airlines shares fell 3.2%, Southwest Airlines declined 1.1%, and Delta Air Lines lost 1.9%.

Cruise operators also traded lower, with Carnival falling 3% and Norwegian Cruise Line Holdings slipping 1.8%.

As of 10:10 a.m. ET, the Dow Jones Industrial Average was down 514.42 points, or 0.97%, at 52,410.73.

The S&P 500 fell 34.32 points, or 0.46%, to 7,469.53, while the Nasdaq Composite dropped 78.12 points, or 0.31%, to 25,739.43.

The latest developments threaten to derail the rally that has lifted the S&P 500 nearly 10% since the beginning of the year, despite the sharp losses it suffered earlier in 2026 following the outbreak of the war with Iran.

Analysts believe the renewed surge in oil prices could bring inflation concerns back into focus, further complicating the US Federal Reserve's monetary policy outlook.

The CBOE Volatility Index (VIX), often referred to as Wall Street's fear gauge, climbed to its highest level in more than a week before rising a further 0.99 points to 17.12.

In a separate development, the International Monetary Fund once again lowered its global growth forecast for 2026 to 3.0%, warning that risks stemming from the conflict in the Middle East remain elevated.

Investors are also awaiting the release of the Federal Reserve's June meeting minutes later in the session for clearer insight into policymakers' assessment of inflation risks and the economic outlook.

"Historically, Fed minutes haven't been major market movers, but I think this time could be different," said Art Hogan, Chief Market Strategist at B. Riley Wealth.

According to CME Group's FedWatch tool, markets are currently pricing in at least one Federal Reserve interest rate increase by the end of 2026.

On the market breadth front, declining stocks outnumbered advancers by a ratio of 2.6-to-1 on the New York Stock Exchange and 2.03-to-1 on the Nasdaq. The NYSE also recorded 19 new 52-week highs and 43 new lows.