By Krystal Hur
A widening Middle East conflict sparked stock-market declines from New York to Seoul, with an early spike in oil prices touching off fears about an economic slowdown and a fresh bout of inflation.
The Dow Jones Industrial Average slid more than 1,200 points on Tuesday morning, on pace for its worst day since April, after the conflict threatened to halt access to the Strait of Hormuz, a key maritime corridor for the world's oil supply. European and Asian stocks also fell sharply, as did gold and bitcoin. Treasury yields ticked higher.
By midafternoon trading, the blue-chip index and other major U.S. benchmarks had found their footing. President Trump wrote in a social-media post that he had ordered the U.S. International Development Finance Corp. to provide insurance and guarantees to maritime trade in the Persian Gulf, and offered Naval escorts to tankers if necessary.
The Dow fell for a third-straight session, closing Tuesday down 0.8%, or around 404 points. Oil prices steadied, with U.S. crude futures ending the session 4.7% higher at $74.56 a barrel.
The selloff cut across a swath of stocks, including big tech, industrials and materials. Even sectors such as energy, which had rallied on Monday on the belief it stood to benefit from a broader conflict that raised prices, were engulfed in the downturn.
Some of the biggest declines were in lithium producer Albemarle, gold miner Newmont and Micron Technology, all down more than 7% on Tuesday. Shares of AutoZone tumbled 6.3%, Intel lost 5.3% and manufacturing giant Caterpillar slipped 4%. Tesla slid 2.7%, while Nvidia lost 1.3%.
Investors had been largely unphased Monday, betting that the conflict would be fleeting and contained. That changed Tuesday, after an Iran commander threatened to set fire to ships crossing the strait that carries one-fifth of global oil supply from Saudi Arabia, Qatar and other major producers.
Analysts say that the recent developments were a tipping point for a market trading at historically expensive levels and contending with worries about massive spending on artificial intelligence and the technology's potential disruption of industries like software.
"It takes a little bit of the air out of a balloon in a market where valuations are already pretty elevated," said Trevor Slaven, global head of asset allocation at Barings.
The S&P 500 and the Nasdaq composite lost 0.9% and 1%, respectively.
The U.K.'s FTSE 100, Germany's DAX and the Stoxx Europe 600 all notched their biggest declines since April. South Korea's Kospi slid 7.2%, its biggest one-day drop in over a year. Japan's Nikkei 225 dropped 3.1%, while Hong Kong's Hang Seng fell 1.1%.
The conflict in the Middle East remains in its early stages. But analysts and investors warn that over time, war can suppress economic growth while spurring inflation, a combination that leads to prolonged declines in both stocks and bonds, bedrock investments for millions of American savers. The last time both assets fell in tandem was in 2022, when rising interest rates and inflation left individual investors with nowhere to hide.
Analysts point out that things are different this time. Interest rates aren't at near-zero levels anymore, like they were in 2022 following the Covid pandemic. Oil prices are well below where they were then, when Russia's invasion of Ukraine sent prices over $100 a barrel.
But if the war drags on for months and takes energy prices higher with it, there could be consequences for everyday Americans' investments, some analysts warn.
U.S. Treasury yields initially spiked, with investors worrying that rising energy prices would push up inflation. Yields later retraced their gains after New York Fed President John Williams said at a conference that cooling inflation could allow for interest-rate cuts. The yield on the 10-year note rose to 4.056%, up from 4.051% Monday.
Diesel futures on Tuesday rose to $3.19 a gallon, their highest settlement value since 2023, according to Dow Jones Market Data, in an ominous sign for the economic fallout of the conflict now upending the Middle East. A sustained increase would ding truckers that rely on the fuel to transport goods, as well as homeowners that burn heating oil to warm their houses.
One place investors have found safety: the greenback. The WSJ Dollar Index rose Tuesday, while emerging-market currencies such as the Chilean peso, Brazilian real and Hungarian forint slumped relative to the U.S. dollar.
The price of gold, a traditional haven during periods of geopolitical turmoil fell, sliding 3.5% to $5,107.40 a troy ounce.
Some analysts say that the selloff could be short-lived, pointing out that dip-buyers have been quick to pounce on previous bouts of volatility, as they did during April's tariff-driven selloff. President Trump could also take measures to ease the declines, as he did when he paused the bulk of his reciprocal tariffs last year due to what he called a "yippy" reaction in the bond market.
"From everything we've seen, the buy-the-dip mentality is likely going to still be there," said Chris Maxey, chief market strategist at Wealthspire.
Write to Krystal Hur at krystal.hur@wsj.com
(END) Dow Jones Newswires
March 03, 2026 17:10 ET (22:10 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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