Trump vows harder strikes on Iran as Wall Street tumbles, Nasdaq drops 2%

US stocks fell across the board Wednesday as inflation concerns collided with escalating geopolitical risk in the Middle East.

The Dow Jones Industrial Average closed down 953.33 points, or 1.87 percent, at 49,918.78 on the New York Stock Exchange. The S&P 500 fell 119.66 points, or 1.62 percent, to 7,266.99, and the tech-heavy Nasdaq Composite dropped 509.32 points, or 1.98 percent, to 25,169.50.

The losses marked the first back-to-back decline for Wall Street in three weeks, as worries over stretched valuations in AI-related stocks were compounded by fresh headwinds from the Middle East.

Semiconductor and AI stocks led the selloff. Nvidia tumbled 3.4 percent and Micron Technology fell 4.7 percent. The Philadelphia Semiconductor Index dropped 3.6 percent.

AI server maker Super Micro Computer (SMCI) plunged 23.1 percent after announcing plans to raise $7 billion through a share offering to fund component purchases.

Middle East tensions also weighed on investor sentiment. President Donald Trump warned on Truth Social that Iran would "pay a price" following overnight exchanges of fire, and later said the United States would strike Iran "harder." Iranian President Masoud Pezeshkian responded by signaling a firm counter-response, further ratcheting up tensions.

Oil prices climbed as fears of a broader conflict between the two countries grew. Brent crude futures for August delivery settled up 1.80 percent at $93.10 a barrel, while WTI crude futures for July delivery rose 2.07 percent to $90.03 a barrel.

US consumer price index data released Wednesday also stoked inflation concerns. The CPI rose 4.2 percent year-on-year in May, the largest annual increase in three years.

Core CPI, which strips out volatile food and energy prices, rose 0.2 percent from the previous month and 2.9 percent from a year earlier, in line with market expectations. "Contrary to fears, prices showed some stability, but they still far exceed the Federal Reserve's target, and the market is watching the prolonged effects of the war — so the data did little to ease concerns about further rate hikes," said Seo Sang-young, an analyst at Mirae Asset Securities.

Gold, typically a safe-haven asset, also weakened. Spot gold prices tumbled 4.3 percent to $4,077.91 per ounce, as rising oil prices heightened inflation fears and the prospect of additional rate increases dimmed the appeal of the non-yielding metal.

"If the current Middle East tensions persist or worsen, the market's optimistic inflation outlook could prove wrong," said Chris Zaccarelli, chief investment officer at Northlight Asset Management. "Rising energy prices could stand in the way of any further decline in inflation."