The U.S. stock market slid on Tuesday as the conflict between Israel and Iran intensified. The Dow Jones Industrial Average lost 299.29 points, or 0.70%, to close at 42,215.80. The S&P 500 shed 0.84% to end at 5,982.72, while the Nasdaq Composite fell 0.91% to settle at 19,521.09.
President Donald Trump threatened Iran’s leader on Tuesday, emphasizing heightened tensions between the two nations. In a series of posts on Truth Social, Trump stated, “We know exactly where the so-called ‘Supreme Leader’ is hiding. He is an easy target, but he is safe there —We are not going to take him out (kill!), at least not for now.
But we don’t want missiles shot at civilians, or American soldiers. Our patience is wearing thin.”
Trump convened with his national security team in the White House Situation Room Tuesday afternoon. The Pentagon simultaneously moved assets to the Middle East to bolster U.S. military defensive capabilities and expand Trump’s options.
This follows Trump’s Monday declaration urging that “everyone should immediately evacuate Tehran.”
Oil prices spiked as the conflict escalated, reversing Monday’s declines. The contract for July delivery gained $3.07, or 4.28%, to close at $74.84 per barrel, while global benchmark Brent crude for August rose $3.22, or 4.4%, to $76.45.
Stocks tumble amid rising tensions
Fresh retail sales data also weighed on stocks. Consumer spending in May revealed a dip of 0.9% on the month, worse than the Dow Jones forecast of a 0.6% decline. “The economy is slowing with consumers nervous about exactly what lies ahead and are choosing to save overall rather than flash some cash at the shops and malls,” said Chris Rupkey, chief economist at Fwdbonds.
The data comes ahead of the Federal Reserve’s meeting, where the central bank is largely expected to hold rates steady. Ross Mayfield at Baird noted that it’s “too late” for the Fed to change its course in response to the retail sales data. However, he suggested the weaker report could prompt the Fed to take a more dovish stance.
Despite the geopolitical tensions, Morgan Stanley’s Mike Wilson asserted that an improving outlook for corporate earnings would likely overshadow the conflict in the minds of investors. “We’re not bullish because we’re hoping for some conflict here. We’re bullish because earnings revisions have turned up, and they’ve turned up meaningfully since the middle of April,” he explained.
Wilson emphasized that the U.S. stock market will likely see only a minor pullback as a consequence of the ongoing conflict. “Right now, it feels like this is a 5% to 7% correction type of an event, for now, but we’ve got to stay vigilant,” Wilson said on “Power Lunch.”
The market remains volatile, and investors are closely watching the developments in geopolitical tensions, trade policies, and interest rate directions to gauge their next moves.
