U.S. stock indexes fell nearly 2% on June 10 local time, as big tech stocks were rattled by an oil shock triggered by tensions involving Iran.
Despite relief that the May Consumer Price Index matched expectations, those gains were overshadowed by President Donald Trump’s warning of additional strikes against Iran. The renewed U.S.-Iran conflict was the key driver behind the decline.
Concerns over the conflict pushed West Texas Intermediate crude higher, while Treasury yields and the dollar also rose, creating a triple burden for risk assets. Big tech stocks led the losses, with Tesla and Nvidia each falling by nearly 4%. Oracle and Super Micro also slumped on concerns over funding.
Geopolitics overshadowed macroeconomic data. On June 10 local time, Wall Street was dragged lower by renewed conflict between the U.S. and Iran, sending all three major indexes down by nearly 2% despite inflation data that matched market expectations.
The S&P 500 fell 1.62%, the Dow Jones Industrial Average dropped 1.87%, and the tech-heavy Nasdaq declined 1.98%. The Philadelphia Semiconductor Index plunged 3.57%, magnifying the losses. Among S&P 500 constituents, 328 stocks fell, showing that weakness spread broadly across the market. The Russell 2000, which tracks small-cap stocks, also fell 1.10%.
The Iran factor erased the comfort from CPI
The May CPI released before the market opened was in line with expectations, briefly easing fears of an inflation surprise. But that relief did not last long.
Sentiment shifted quickly after President Trump said at a White House briefing that the U.S. would hit Iran “very hard.” The remark came with the door left open to negotiations, but also with a warning of retaliation over the downing of a U.S. military helicopter. After the close, the Defense Secretary escalated the tone further, saying the U.S. would target key Iranian facilities. Iran responded by threatening to strike U.S. military facilities in the Middle East.
What had been an encouraging inflation report was buried by geopolitical risk. Market attention shifted from economic data to the Middle East.
Oil, yields and the dollar all moved higher
Fears of conflict immediately lifted oil prices. WTI, which had been below $90 a barrel the previous day, rebounded 2.07% to settle at $90.03, supported by concerns about disruption to Middle Eastern crude supply.
Yields also rose. Despite the benign inflation reading, the yield on the 10-year U.S. Treasury note increased 3.5 basis points to 4.55%. The 2-year yield, which is more sensitive to monetary policy, rose 2.6 basis points to 4.14%. The rise in oil prices appears to have fueled concern that inflation could be pushed back up in the months ahead. The dollar also strengthened as investors sought safety, with the dollar index up 0.11% at 100.02.
The simultaneous rise in oil, yields and the dollar is a threefold burden for risk assets, adding fuel to the market’s case for profit-taking.
Semiconductors and big tech led the declines
By sector, all but consumer staples, energy and real estate finished lower. Industrials, materials and information technology saw the steepest declines. The rotation seen the previous day, in which money moved from one sector to another, disappeared. Selling pressure hit the market as a whole.
Large-cap tech was especially weak. Tesla and Nvidia each fell by nearly 4%, while Amazon, Meta, Alphabet and Microsoft all declined by around 2%. Rising rates directly pressure technology stocks, whose valuations depend heavily on future earnings.
Among individual names, concerns over fundraising emerged as a new flashpoint. Oracle fell about 6% in after-hours trading despite posting solid quarterly results and a positive outlook, as worries about large-scale capital raising came to the fore.
Super Micro Computer, which announced a stock offering after the prior session’s close, plunged 28% on the day. The episode showed that in the current market, the key issue moving stocks is not so much earnings growth as how companies will fund themselves.
At its core, the day’s selloff was driven not by earnings or inflation, but by geopolitics. Unless tensions in the Middle East ease, upward pressure on oil and yields is likely to continue.
For investors, the key variables are clear: whether the U.S. actually strikes Iran and whether oil shipments through the Strait of Hormuz are disrupted. For inflation to return to the center of market attention, uncertainty from the Middle East must first subside.