A global sell-off hit Wall Street on Tuesday, with oil prices rising sharply as worries mounted that a war with Iran is escalating and could do more damage to the global economy than feared.
The S&P 500 was down 2 percent in morning trading. The Dow Jones Industrial Average was down 1,048 points, or 2.1 percent, as of 10 a.m. Eastern time, while the Nasdaq composite was down 2.1 percent.
It was just a day ago that US stocks opened with heavy losses, only to recover all and end the day with small gains.
But that had the caveat that oil prices didn’t jump too high, like over $100 per barrel.
On Tuesday, oil prices approached that mark and raised many alarms. The price of a barrel of Brent crude, the international standard, jumped another 7.5 percent to $83.58. It was sitting near the $70 low last week. A barrel of benchmark US crude, meanwhile, rose 7.6 percent to $76.64.
Oil prices soared as Iran attacked the US Embassy in Saudi Arabia, part of an expansion of sanctions against key oil and gas producing areas in the world.
Concerns are high about what will happen to the Strait of Hormuz off the coast of Iran, a narrow strait through which about a fifth of the world’s oil passes.
Uncertainty in the markets raises questions about how long this fight might last.
Strikes by the United States and Israel have already killed Iran’s supreme leader Ayatollah Ali Khamenei, but President Donald Trump has suggested the war could last for weeks.
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Late Monday night, Trump said on his social media platform, “Wars can be fought ‘forever,’ and with great success” with the supply of weapons the United States has.
A jump in oil prices will increase inflation, which is already too high for almost everyone, and put more pressure on US households and businesses by raising fuel bills and shipping products.
The average price of a liter of gasoline in the US jumped 11 cents overnight to about $3.11, according to data from the automobile club AAA.
That has hurt stock markets so far that have focused on countries and companies that use a lot of oil, natural gas and other petroleum-based fuels.
In South Korea, the biggest energy exporter, the Kospi stock index fell 7.2 percent in its worst day since two summers ago as markets reopened after a holiday on Monday. It has been setting records recently.
Japan’s Nikkei 225 fell 3.1 percent, as analysts said Japan has more than 200 days of strength. In Europe, where natural gas prices rose, Germany’s DAX lost 3.8 percent.
On Wall Street, airlines continued to sink on worries about rising fuel costs. The war also led to flight cancellations and stranded passengers.
United Airlines was down 5 percent, American Airlines was down 4.4 percent and Delta Air Lines was down 4 percent.
Among the few winners on Wall Street was Target, which rose 3.3 percent after reporting better-than-expected quarterly profit in the latest quarter. It also gave a forecasted range of profits for the coming financial year where its average was above analysts’ expectations.
In the bond market, Treasury yields are rising as worries mount about worsening inflation. The 10-year Treasury yield rose to 4.09 percent from 4.05 percent late Monday and from 3.97 percent on Friday.
Higher yields could mean higher borrowing costs for US households and businesses, in everything from mortgages to bond issuance. They also put downward pressure on stock prices and all kinds of other investments. Bitcoin dropped below $67,000.
When Treasuries pay more interest, they can further lower the price of gold, paying nothing to their investors. Gold fell 4.9 percent on Tuesday to $5,053.30, ending a strong run that had taken it above $5,300 as investors looked for safe places to park their money amid the war.
High inflation can also tie the hands of the Federal Reserve and keep it from lowering interest rates. The Fed had cut rates several times last year and indicated more cuts would come in 2026. That will help boost the economy and inflation, but low prices can also make inflation worse.
Traders are now pushing back their summer expectations for the Fed to resume cutting rates, according to data from CME Group. That’s even though Trump has been calling on Fed officials in a very angry and personal way to cut rates now.
© 2026 The Canadian Press
