Tech Sector Supports Wall Street Amid Middle East Tensions and Fed Policy Uncertainty
Wall Street futures opened higher following a sharp escalation in US-Iran tensions after Iran attacked ships in the Strait of Hormuz, prompting a US retaliatory strike on about 90 Iranian targets overnight. A US official confirmed the ceasefire with Iran has ended for now, fueling fears of prolonged conflict and disruptions to critical oil shipping routes. Brent crude oil futures rose over 1% to $78.82 per barrel, continuing a recent surge sparked by geopolitical risks, while US WTI crude climbed to $74.29 per barrel. President Donald Trump declared he no longer seeks negotiations with Tehran, intensifying market concerns.
Asian markets showed mixed performance, with Japan’s Nikkei up 1.4% and Shanghai slightly higher, while South Korea’s Kospi and Hong Kong’s Hang Seng declined. Notably, Japanese memory chip maker Kioxia surged up to 11% after Bain Capital sold its stake amid booming AI-driven storage demand. Kioxia plans a US IPO next year. On Wall Street, the Dow Jones fell 1.1% amid inflation worries linked to rising oil prices, while the S&P 500 dipped 0.2%. The Nasdaq gained 0.3%, buoyed by a tech rally led by chipmakers and AI infrastructure stocks. Broadcom shares jumped 4.8% after Apple committed $30 billion to its chip production, lifting the Philadelphia Semiconductor Index 2%.
Energy stocks like Marathon Petroleum and Chevron rose with oil prices, but airlines suffered heavy losses due to fears of soaring jet fuel costs amid Middle East instability. American Airlines dropped about 4%, United Airlines 1.6%. Consumer and travel stocks such as Booking Holdings and Home Depot also declined. SpaceX shares fell below their IPO price shortly after listing, though analysts remain optimistic, with Morgan Stanley rating it "overweight" and a $300 target price.
US Treasury yields climbed amid inflation concerns, with the 10-year yield reaching 4.5%. Gold prices dropped over 2%, pressured by expectations of further Fed rate hikes driven by surging energy costs. Bitcoin also declined 2.4%, reflecting market nervousness over sustained high interest rates.
The Federal Reserve’s latest meeting minutes revealed deep internal divisions over monetary policy. Some policymakers favor easing soon, while a dominant group supports at least one more rate hike this year beyond the current 3.5%-3.75% range. Fed Chair Kevin Warsh faces challenges balancing the inflationary impact of massive AI investments and short-term price pressures. The Fed has shortened its statements to reduce market signaling, leaving investors reliant on economic data to gauge future rate moves. Analysts expect US inflation to remain elevated near 4%, complicating prospects for monetary easing amid renewed geopolitical risks.
Overall, Wall Street’s tech sector provided a crucial buffer against broader market declines triggered by geopolitical tensions and inflation fears, while energy prices and Fed policy uncertainty continue to shape investor sentiment.
