US stocks saw their declines deepen during Wednesday's midday trading session, with the Dow Jones Industrial Average dropping approximately 800 points. A renewed flare-up in Middle East tensions, following comments from the US President, triggered a sharp spike in oil prices. The Federal Reserve is scheduled to release the minutes from its June monetary policy meeting later today.
The Dow Jones Industrial Average fell by 796.66 points, or 1.51%, to 52,128.49. The Nasdaq Composite declined by 237.03 points, or 0.92%, to 25,581.66. The S&P 500 index dropped 67.61 points, or 0.90%, to 7,436.24.
During Wednesday's midday session, Brent crude futures surged by 8% to $80.07 per barrel. US West Texas Intermediate crude futures advanced by 7.6% to $75.77 per barrel.
This price action followed remarks from the US President at the NATO summit in Turkey, who stated, "I think the ceasefire is over. I don't want to deal with them anymore. They're just trash."
These comments 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.
On Wednesday, the NATO Secretary General, speaking to reporters at the summit in Ankara, Turkey, characterized the US strikes as "absolutely necessary."
"When there is a ceasefire and Iran is essentially violating it—we saw what happened with the ships yesterday—I think it was crucial that the US responded with force," he said.
Rising oil prices provided a boost to energy shares. ConocoPhillips and Marathon Oil saw their stock prices rise by about 2%, while Chevron and Exxon Mobil gained more than 1%.
In contrast, semiconductor stocks continued to face recent pressure. For instance, Micron Technology shares fell 4% and have now declined 25% from their 52-week high as of Tuesday's close. The VanEck Semiconductor ETF (SMH) dropped nearly 2%, down 13% from its recent peak.
Market Analyst's Perspective on Geopolitical Risk
"The renewed tensions in the Middle East have shattered the market's increasingly complacent narrative, 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 report Wednesday morning.
Hathorn added, "The latest attacks serve as a reminder to investors that a lasting deal between the US and Iran is far from guaranteed, even while a ceasefire remains in place. Markets had grown accustomed to the idea that the conflict would fade into the background, but recent developments suggest that assumption may have been premature."
Focus Shifts to Federal Reserve Minutes
Investor attention will also turn to the release of the Federal Open Market Committee's June meeting minutes, scheduled for 2 p.m. ET on Wednesday. The report is expected to provide further insight into the first policy meeting chaired by Fed Chair Kevin Warsh, during which officials held interest rates steady while hinting that further hikes might be necessary if inflationary pressures persist.
"The FOMC minutes will be a wild card because Warsh was remarkably opaque at the recent press conference," said Adam Crisafulli, founder of Vital Knowledge.
He noted, "Typically, Jerome Powell would provide a fairly comprehensive account of the meeting's discussion, but Warsh did not do that, so the minutes—which could have a hawkish tilt—might contain some surprises."
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