A worldwide sell-off in stocks slammed Wall Street on Tuesday, with oil prices still higher on worries that the war with Iran is widening and could cause more lasting damage to the global economy than feared.
The S&P 500 fell two percent in morning trading. The Dow Jones industrial average was down 1,048 points, or 2.1 percent, and the Nasdaq composite was down 2.1 percent by 10 a.m. ET.
Just a day ago US stocks opened with heavy losses, all but recovered to end the day with some gains.
But that came with the caveat that oil prices did not jump much above $100 per barrel.
On Tuesday, oil prices edged closer to that mark and raised more warnings. Brent crude, the international standard, rose another 7.5 percent to $83.58 a barrel. It was sitting near the $70 low a week ago. Meanwhile, benchmark US crude rose 7.6 percent to $76.64 a barrel.
Oil prices surged after Iran struck the US embassy in Saudi Arabia, part of a widening range of targets covering areas critical to the world’s oil and natural gas production.
Worries are especially high about what will happen to the Strait of Hormuz off Iran’s coast, a narrow passage through which one-fifth of the world’s oil passes.
Questions are mounting as to how long this war can continue, making things uncertain for the markets.
Strikes by the United States and Israel have already killed Iran’s Supreme Leader Ayatollah Ali Khamenei, but President Donald Trump has indicated the fighting could continue for weeks.
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Late Monday night, Trump said on his social media network that “wars can be fought ‘forever’ and very successfully” with the supply of munitions the United States has.
A jump in oil prices would worsen inflation, which is already too high for almost everyone, and put more pressure on US households and businesses by raising bills to transport gasoline and products.
The average price of a gallon of gasoline in the US jumped 11 cents overnight to about $3.11, according to data from Motor Club AAA.
That has caused damage in stock markets focused on countries and companies that use oil, natural gas and other petroleum-based fuels.
In South Korea, the biggest energy importer, the Kospi stock index fell 7.2 percent for its worst day since two summers ago as markets reopened after a holiday on Monday. The record was set recently.
Japan’s Nikkei 225 fell 3.1 percent, with analysts saying Japan has substantial reserves of energy for more than 200 days. In Europe, where natural gas prices soared, Germany’s DAX lost 3.8 percent.
On Wall Street, airlines continued to be weighed down by worries about rising fuel bills. The war canceled flights and stranded passengers.
United Airlines fell five percent, American Airlines shed 4.4 percent and Delta Air Lines fell four percent.
Some of the winners on Wall Street included Target, which rose 3.3 percent after reporting a better-than-expected latest quarter profit. It also gave a forecast range for profits in the coming financial year, the midpoint of which was higher than analysts’ expectations.
In the bond market, Treasury yields rose as worries grew about worsening inflation. The yield on the 10-year Treasury jumped to 4.09 percent from 4.05 percent late Monday and just 3.97 percent on Friday.
Higher yields could mean more expensive borrowing for US households and businesses, from mortgages to bond issues. They put downward pressure on the prices of stocks and all kinds of other investments. Bitcoin drops below $67,000.
When Treasuries pay more interest, they can lower the price of gold, which pays investors nothing. Gold fell 4.9 percent to $5,053.30 on Tuesday, ending a strong run that took it above $5,300 as investors sought safe places to put their money amid the war.
High inflation ties the Federal Reserve’s hands and prevents it from cutting interest rates. The Fed has cut rates several times in the past year and has indicated more cuts are coming in 2026. That helps boost the economy and inflation, but lower rates can make inflation worse.
According to data from CME Group, traders are now pushing their expectations further back into the summer as the Fed resumes cutting rates. Even though Trump is calling on Fed officials in very angry and personal terms to cut rates now.
© 2026 The Canadian Press
(tags to translate)Iran(T)Iran War(T)Stock Market(T)Wall Street(T)Economy(T)World
