Wall Street closed lower on Tuesday as investors reacted to escalating conflict in the Middle East and weaker-than-expected US economic data. The Dow Jones Industrial Average lost 299 points, or 0.7%, finishing at 42,215. The S&P 500 shed 0.8%, while the tech-heavy Nasdaq fell nearly 0.9%, dragged down by investor caution amid rising uncertainty.
Markets were rattled after President Donald Trump issued a series of warnings to Iran’s leadership on social media, demanding “unconditional surrender” and suggesting that Tehran was within reach of US military targeting. Trump convened his national security team in Washington following his early departure from the G7 summit in Canada. The Pentagon has since deployed additional assets to the region, further fuelling market anxiety.
Oil jumps as conflict escalates
Oil prices spiked in response to the geopolitical tension, with both West Texas Intermediate and Brent crude futures climbing more than 4%. WTI rose above US$74 a barrel, reversing Monday’s decline amid earlier hopes of de-escalation. Energy markets are closely watching for signs of supply disruption or broader regional fallout from the standoff.
Safe haven assets were mixed. Gold nudged slightly higher to US$3,390 an ounce, while the VIX volatility index rose to 21.32, reflecting growing investor unease. Bitcoin slumped 3.7% to US$103,921.
Consumer caution signals slowdown
Beyond the geopolitical backdrop, fresh retail sales data pointed to growing consumer caution in the US. Sales fell 0.9% in May, marking the second consecutive monthly decline and coming in worse than expectations. Industrial production also slipped, with weaker utility output and subdued manufacturing activity. Homebuilder confidence dropped to its lowest level since late 2022, underscoring broader concerns about economic momentum.
With the Federal Reserve meeting later this week, investors are looking for signals on whether policymakers may adopt a more dovish tone. While rates are widely expected to remain on hold, weaker data could open the door to a cut later this year. Fed futures are still pricing in two rate cuts starting from September.
Australian markets set to fall
ASX futures point to a 32-point drop at the open, following Wall Street’s retreat. The Australian dollar was down 0.7% overnight to 64.76 US cents. Iron ore fell 1.2% to US$92.90 a tonne, while 10-year bond yields in Australia held at 4.25%.
