US stocks maintained their losses into the closing session on Wednesday, as the release of the Federal Reserve's June meeting minutes revealed a split among officials on policy direction. Tensions in the Middle East flared up again after President Trump stated a ceasefire with Iran was "over," leading to a sharp spike in oil prices.
The Dow Jones Industrial Average fell 545.41 points, or 1.03%, to 52,379.74. The Nasdaq Composite declined 9.90 points, or 0.04%, to 25,808.79, while the S&P 500 dropped 25.18 points, or 0.34%, to 7,478.67.
During Wednesday's session, Brent crude futures surged 8% to $80.07 per barrel. West Texas Intermediate crude futures climbed 7.6% to $75.77 per barrel.
The move in oil followed comments from President Trump at the NATO summit in Turkey, where he stated, "I think the ceasefire is over. I don't want to deal with them anymore. They are trash."
This came after the US conducted what it described as "a series of powerful strikes" against Iran on Tuesday in retaliation for attacks on three commercial vessels transiting the Strait of Hormuz.
NATO Secretary General Mark Rutte, speaking at the summit in Ankara, told reporters the US strikes were "absolutely necessary," adding that a strong response was crucial given Iran's actions.
Energy stocks advanced, lifted by the rise in oil prices. ConocoPhillips and Marathon Oil shares gained around 2%, while Chevron and Exxon Mobil rose more than 1%.
Conversely, chip stocks extended recent pressure. For instance, Micron Technology fell 4%, bringing its decline from its 52-week high to 25% as of Tuesday's close. The VanEck Semiconductor ETF (SMH) dropped nearly 2%, down 13% from its recent peak.
The renewed Middle East tensions "have broken the narrative of growing market complacency, prompting investors to reassess geopolitical risks after several weeks of pricing in a smooth de-escalation path," said Daniela Hathorn, Senior Market Analyst at Capital.com, in a note Wednesday morning.
Hathorn added that the latest attacks serve as a reminder that a lasting deal between the US and Iran is far from guaranteed, challenging the market's recent assumption that the conflict would fade into the background.
The minutes from the Federal Open Market Committee's June meeting, released at 2 p.m. ET Wednesday, indicated officials were divided on the policy path at the last gathering. A minority saw a case for raising interest rates, though they ultimately supported the decision to hold rates steady.
The minutes from the June 16-17 meeting showed policymakers' inflation concerns had intensified further, while their worries about the labor market had eased slightly.
"Participants generally judged that the information received over the intermeeting period indicated that upside risks to price stability remained elevated, while downside risks to employment had moderated somewhat," the minutes stated.
The FOMC voted unanimously at the June meeting to maintain the target range for the federal funds rate at 3.5% to 3.75%. This was the first policy meeting under new Fed Chair Kevin Warsh. The post-meeting statement noted that inflation remained elevated and the central bank remained committed to price stability.
The latest interest rate projections released after the June meeting showed nine officials anticipated at least one 25-basis-point rate hike this year, with six of those expecting at least two hikes. Another nine officials projected holding rates steady or cutting them. New Chair Warsh, a critic of "forward guidance," did not submit a rate forecast.
The minutes revealed the committee discussed several potential scenarios for the US economy in the coming months. In a scenario where inflation slows, most participants anticipated the Fed would "maintain the current target range for the federal funds rate, or eventually lower the target range."
However, in an alternative scenario where energy prices and tariffs rise, and demand spurred by artificial intelligence fuels higher inflation, most participants believed "additional policy firming would likely be warranted."
This concern was supported by economic data released a week after the meeting. The Fed's preferred inflation gauge, the Personal Consumption Expenditures price index, rose 4.1% year-over-year in May, its largest increase since April 2023, driven partly by energy prices pushed higher by the war in Iran. The core PCE index, which excludes food and energy, also rose 3.4% year-over-year.
Since the June meeting, oil price volatility stemming from the Middle East situation has made the overall inflation outlook increasingly difficult to predict. Crude prices had fallen sharply as the Iran-US ceasefire appeared to take hold and more vessels transited the Strait of Hormuz, but they have resumed their ascent this week as hostilities between the US and Iran have reignited.
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