US Market Selloff Deepens as Middle East Tensions, Inflation Concerns Weigh on Sentiment

Index Update

US stocks ended sharply lower on Wednesday, with major indices hitting multi-week lows as rising Middle East tensions pushed oil prices higher and weakened risk sentiment. The S&P 500 fell 1.6%, the Nasdaq dropped 2%, and the Dow plunged 953 points, pressured by broad selling across technology, semiconductor, Tesla, and industrial stocks. AI valuation concerns and caution ahead of SpaceX’s IPO added further pressure, while May CPI showed headline inflation rising to 4.2%, though core inflation was softer than expected on a monthly basis.

Market Movers

Among the top-performing stocks of the session Big Tree Cloud Holdings Limited. surged 291.30%, while VS Media Holdings Limited. rallied 148.97%. On the losing side, America's Car-Mart, Inc. fell 55.03%, while Super Micro Computer, Inc. declined 27.98%, making them the weakest performers during the trading day.

Commodities Update

Oil prices retreated on Thursday, with WTI crude falling below $90 per barrel and Brent slipping under $93 per barrel, as hopes for renewed peace negotiations emerged after the US military announced the completion of its latest strikes on Iran. Earlier, prices had risen following fresh US attacks on Iran and reported Iranian missile and drone strikes targeting US vessels in the Strait of Hormuz, underscoring the collapse of the April ceasefire. While the near-total closure of the Strait of Hormuz continues to tighten global energy supplies, limited oil shipments are still reportedly leaving the Persian Gulf, easing some supply concerns. Meanwhile, US crude inventories fell by 7.2 million barrels last week, marking a seventh consecutive weekly decline and highlighting ongoing strength in underlying oil demand.

Gold rose above $4,100 per ounce and silver climbed above $64 per ounce on Thursday after the US military said it had completed its latest strikes on Iran, boosting hopes for renewed peace talks and easing some inflation concerns. However, both precious metals remained near recent multi-month lows as the ongoing US-Iran conflict and the near-total closure of the Strait of Hormuz continued to disrupt energy supplies, sustaining fears of higher inflation and tighter monetary policy. Adding to the uncertainty, US inflation accelerated in May to its fastest pace in more than three years, largely due to rising energy costs, though the data matched expectations. Markets slightly reduced their outlook for additional Federal Reserve rate hikes, but a quarter-point increase in December remains fully priced in.

Macro Updates

US Producer Inflation Expected to Accelerate in May

US producer prices are expected to rise 0.7% month-over-month in May 2026, easing from April’s sharp 1.4% increase but remaining elevated due to higher energy costs linked to the Iran conflict. Core PPI is forecast to increase 0.5%, down from 1% in April. On an annual basis, headline PPI is projected to accelerate to 6.4%, its highest level since December 2022, while core PPI is expected to rise to 5.4%, also marking a multi-year high.

Dollar Slips as Safe-Haven Demand Eases

The dollar index edged below 100 on Thursday as safe-haven demand weakened after the US military said it had completed its latest strikes on Iran, raising hopes for renewed peace talks. While US inflation accelerated in May due to higher energy costs, the data matched expectations, leading traders to slightly reduce bets on further Fed rate hikes, though a December quarter-point increase remains fully priced. Investors now await producer inflation and jobless claims data for clearer signals on Fed policy.

Bonds Commentary

The US 10-year Treasury yield held steady around 4.55% on Thursday as investors assessed easing Middle East tensions after the US completed its latest strikes on Iran, raising hopes for renewed peace talks. While May consumer inflation accelerated due to higher energy costs, the data matched expectations, leading traders to slightly reduce bets on further Fed rate hikes. Markets now await producer inflation and weekly jobless claims data for clearer signals on the Fed’s policy path.

Futures Update

US stock futures rebounded on Thursday as hopes for renewed US-Iran peace talks improved sentiment after the US military completed its latest strikes on Iran. The recovery followed a sharp selloff on Wednesday, when the Dow, S&P 500, and Nasdaq all declined. Oracle weighed on tech sentiment after announcing plans to raise $20 billion to fund AI expansion, while broader technology and semiconductor stocks remained pressured by valuation concerns and caution ahead of SpaceX’s IPO.

U.S. stocks came under heavy selling pressure on Wednesday after a directionless start, with the major indices closing near session lows. The S&P 500 fell 119.66 points (-1.62%) to 7,267, breaking below key short-term moving averages and signaling a deterioration in momentum after its recent rally toward 7,600. RSI dropped sharply to around 42, confirming increasing bearish pressure, while elevated trading volume added conviction to the decline. The index is now testing critical support in the 7,250–7,267 region; a breakdown could open the door to further weakness toward 7,100–7,150. To regain a bullish short-term outlook, the S&P 500 would need to reclaim the 7,350–7,400 resistance zone.