Stocks Settle Lower on Middle East Jitters

The S&P 500 Index ($SPX) (SPY) closed down -0.58% on Tuesday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -1.18%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.12%. E-mini S&P futures (ESU26) fell -0.57%, and September E-mini Nasdaq futures (NQU26) fell -0.10%.

Stock indexes settled lower on Tuesday as rising Middle East tensions pushed crude prices higher and stoked inflation worries. Crude oil prices rose more than +1% to a 3-month high on Tuesday, boosting inflation expectations and strengthening expectations that central banks will have to keep raising interest rates to contain inflation. Rising geopolitical tensions in the Middle East are also dampening market sentiment after the US and Iran exchanged attacks over the weekend and after Houthi rebels on Tuesday launched attacks on several Saudi Arabian oil facilities.

Also, an escalating trade war between the US and Canada is weighing on market sentiment. On Tuesday, Canada imposed tariffs of 15% to 50% on hundreds of US goods in retaliation for the action by the US last month to impose 50% tariffs on $20 billion of imports from Canada.

On the positive side for equities, chipmakers and AI-infrastructure stocks moved higher, and energy stocks rallied, limiting losses in the overall market.

Tuesday's US economic news showed that July consumer credit rose +$18.062 billion, stronger than expectations of +$11.340 billion.

Chinese trade news was weaker than expected, weighing on global economic growth prospects. China Aug imports rose +28.2% y/y, weaker than expectations of +31.0% y/y. Also, Aug exports rose +25.0% y/y, weaker than expectations of +25.9% y/y.

Oct WTI crude oil prices (CLV26) closed up more than +1% on Tuesday and posted a 3-month high. Crude prices rose after the US and Iran exchanged attacks in the Strait of Hormuz over the weekend. Also, Saudi Arabia said that attacks from Yemen's Houthi rebels on Tuesday halted operations at several oil facilities. Saudi Arabia's 400,000 bpd Jazan refinery, which had halted operations in July after an earlier attack, was attacked again today with missiles and drones. Also, the rebels launched attacks at Saudi Aramco facilities in Abha and Najran, causing fires and injuring several people. Crude prices extended their gains Tuesday afternoon after Fox News reported the US struck targets near Kharg Island and the Iranian port city of Jask.