Armed conflict in Strait of Hormuz spurs risk aversion
Chip stocks surge, with Intel jumping 9%
US Treasury yields climb back above 4.8%
Wall Street's three major indexes all declined Tuesday (local time) as rising oil prices amid escalating Middle East tensions stoked inflation concerns.
The Dow Jones Industrial Average fell 628.18 points, or 1.18 percent, to close at 52,786.07.
The S&P 500 dropped 45.08 points, or 0.58 percent, to 7,673.52, while the tech-heavy Nasdaq composite slipped 85.58 points, or 0.32 percent, to 26,421.41.
Risk-averse sentiment grew after oil prices spiked over the weekend and during the US Labor Day holiday period, as tensions in the Middle East resurfaced.
Concerns over supply disruptions spread as fighting intensified not only in the Strait of Hormuz but also along Red Sea shipping routes under the influence of the Iran-aligned Houthi rebels.
Yemen's Iran-aligned Houthi rebels said they carried out large-scale retaliatory strikes on Tuesday, targeting facilities and an air base belonging to Saudi Arabia's state oil company, Aramco.
In the Strait of Hormuz, renewed armed conflict between the US and Iran continued to threaten vessel traffic.
Around the market close, reports emerged that a small Iranian oil tanker had been hit by a US missile strike near Iran's Kharg Island. Kharg Island is a key hub for Iranian crude exports in the Gulf.
Iran's Islamic Revolutionary Guard Corps Navy has already vowed immediate retaliation for the US strike.
In response, international oil prices climbed to levels near $100 a barrel.
Brent crude futures for November delivery closed at $97.92 a barrel, up $0.92, or 0.95 percent, from the previous session. West Texas Intermediate crude futures for October delivery settled at $93.03 a barrel, up $1.55, or 1.69 percent.
"Rising oil prices are muddying the inflation picture," said Kyle Rodda, senior financial market analyst at Capital.com, adding, "Military activity is keeping risk premiums elevated in energy markets, as it raises the prospect of a deeper and more prolonged disruption to the global oil supply."
Caution ahead of next week's Federal Open Market Committee (FOMC) meeting also weighed on the market, with investors wary of the August consumer price index due out Friday.
Semiconductor stocks stood out with notable gains that day, partially offsetting the downward pressure from higher oil prices.
Intel and AMD surged 9.1 percent and 5.9 percent, respectively, while Broadcom rose 3 percent.
US Treasury yields also rose amid the oil price surge and inflation worries. The yield on the 10-year Treasury note climbed to 4.805 percent, moving back above 4.8 percent.
Gold prices fell. December gold futures on the Comex dropped 1.0 percent to close at $4,430.10 an ounce.
Copper prices, meanwhile, hit an all-time high amid speculation that President Donald Trump could expand US tariffs on copper to include refined copper.
Three-month copper on the London Metal Exchange rose 1.5 percent to $14,728 a ton.
On Tuesday, the Kospi reclaimed the 7,000 mark shortly after the open, buoyed by strength in semiconductor shares, but retreated below that level during trading to close lower. The index posted its first decline in four trading sessions.
jiyun@heraldcorp.com
