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The broad market index was 0.7% lower, and the Nasdaq Composite dropped 1.2%. The Dow Jones Industrial Average traded down 295 points, or 0.6%.
West Texas Intermediate futures jumped 3% to trade above $101 per barrel. Brent crude climbed 3% to above $108. Those gains built on Monday’s advance, after President Donald Trump called the month-old ceasefire between the U.S. and Iran “unbelievably weak” and said it was “on massive life support” after rejecting an “unacceptable” counterproposal from Tehran to end the war.
In its latest counteroffer, Iran has insisted on war reparations, full sovereignty over the Strait of Hormuz, the release of frozen Iranian assets and lifted sanctions.
With energy prices remaining elevated, even more attention will be given to inflation data to assess the impact of the Iran war on the U.S. economy.
In April, the consumer price index rose 0.6%, putting the annual inflation rate at 3.8%, according to the Bureau of Labor Statistics. While monthly move for headline inflation was in line with expectations, economists polled by Dow Jones were calling for a gain of 3.7% from a year earlier. That annual inflation rate was the highest since May 2023.
“It isn’t like it’s an avalanche, but it’s a steady move upward,” Thomas Martin, senior portfolio manager at Globalt Investments, said to CNBC, adding that inflation is just “going to keep on building” the longer the conflict in the Middle East continues amid a lack of progress in negotiations between the U.S. and Iran.
“As these gas prices and other prices are higher, it’s going to crimp more and more people, so the setup is for there to be continued struggles for the consumer,” he said.
Meanwhile, Micron Technology — which led the S&P 500 and Nasdaq Composite to fresh record highs in the previous session — reversed course from its recent gains, falling more than 5%. The stock soared more than 37% last week and jumped more than 6% on Monday amid a memory chip rally. Alongside Micron, Advanced Micro Devices and Qualcomm dropped 3% and 10%, respectively.
— CNBC’s Anniek Bao and Jeff Cox contributed reporting.