The escalating conflict between Israel and Iran sent shockwaves through the stock market on Tuesday, with the Dow Jones Industrial Average falling nearly 300 points. The S&P 500 and Nasdaq Composite also closed lower as investors grappled with the geopolitical tensions and disappointing retail sales data. President Donald Trump intensified his rhetoric against Iran, threatening its Supreme Leader, Ayatollah Ali Khamenei, and meeting with his national security team in the White House Situation Room.
The Pentagon moved assets to the Middle East to bolster the U.S. military’s defensive capabilities and provide the President with more options. Oil prices surged as the conflict continued, with the contract for July delivery rising $3.07, or 4.28%, to close at $74.84 per barrel. The global benchmark for August increased $3.22, or 4.4%, to $76.45.
Fresh retail sales data showed a decline in consumer spending for May, which fell 0.9%, worse than the expected 0.6% decrease. Chris Rupkey, Fwdbonds chief economist, said, “The economy is slowing with consumers nervous about what lies ahead.”
The data precedes the Federal Reserve’s upcoming meeting, where the central bank is expected to maintain steady interest rates. Ross Mayfield at Baird suggested that the weaker report might allow the central bank to adopt a more dovish stance.
Market reacts to Israel-Iran tensions
Numerous stocks experienced significant moves on Tuesday. Jabil, an electronic manufacturing company, surged nearly 12% after raising its full-year guidance.
On the flip side, JetBlue dropped 3.4% after CEO Joanna Geraghty warned that break-even operating margins were unlikely for the year. Energy stocks rose as crude oil futures jumped amid the Israel-Iran conflict. The S&P 500 energy sector advanced 1%, bolstered by gains in major energy corporations.
Megacap technology stocks weighed on the broader market, with each member of the “Magnificent Seven” trading down. The tech-heavy Nasdaq was particularly affected as investors looked for safer investments amid the geopolitical tensions and weakening consumer data. In summary, the stock market closed in negative territory driven by geopolitical tensions in the Middle East and disappointing retail sales data.
Investors are now looking ahead to the Federal Reserve’s upcoming meeting for indications on future monetary policy.